
Oass_Yi3a 



Book 



A 



If 



TORPEDO BOATS 



STATEMENT 

BEFORE THE 

COMMITTEE ON CLAIMS 

OF THE 

HOUSE OF REPRESENTATIVES 

ON 

HOUSE BILLS 6041 AND 15101, SIXTIETH CONGRESS, FIRST 
SESSION, FOR THE RELIEF OF THE BATH IRON WORKS 

AND OTHERS 



JANUARY 19, 1909 



STATEMENTS OF 

HON. FRANK W. HACKETT, HENRY W. DUNN, Esq. 
and CLARENCE W. DeKNIGHT, Esq., 

OP COUNSEL FOE CLAIMANTS 



COMMITTEE ON CLAIMS, HOUSE OF REPRESENTATIVES OF THE UNITED STATES, SIXTIETH CONGRESS 

MEMBERS OF COMMITTEE 

JAMES M. MILLER, KANS., CHAIRMAN. 
CHARLES Q. TIRRELL, MASS. HENRY M. GOLDFOGLE N Y 

JOSEPH HOWELL, UTAH. CLAUDE KITCHIN, N. C ' 

WILLIAM H. GRAHAM, PA. EZEKIEL S. CANDLER, Jr., MISS. 

GEORGE E. WALDO, N. Y. DORSEY W. SHACKLEFORD, MO. 

GRANT E. MOUSER, OHIO. JAMES O. PATTERSON S C 

CHARLES A. LINDBERGH, MINN. JOHN A. M. ADAIR IND 

WILLIS C. HAWLEY, OREG. ELMER L. FULTON OKLA. 

IRA W. WOOD, N. J. 

A. P. MYERS, CLERK. 

J. W. GARDNER, ASSISTANT CLERK. 



WASHINGTON 

GOVERNMENT PRINTING OFFICE 

1909 



TORPEDO BOATS 



STATEMENT C*- 



BEFORE THE 



COMMITTEE ON CLAIMS 

OF THE 

^ HOUSE OF REPRESENTATIVES 

ON 

HOUSE BILLS 6041 AND 15101, SIXTIETH CONGRESS, FIRST 
SESSION, FOR THE RELIEF OF THE BATH IRON WORKS 

AND OTHERS 



JANUARY. 19, 1909 



STATEMENTS OF 

HON. FRANK W. HACKETT, HENRY W. DUNN, Esq. 
and CLARENCE W. DeKNIGHT. Esq., 

OF COUNSEL FOB CLAIMANTS 



COMMITTEE ON CLAIMS, HOUSE OF REPRESENTATIVES OF THE UNITED STATES, SIXTIETH CONGRESS 

MEMBERS OF COMMITTEE 

JAMES M. MILLER. KANS., CHAIRMAN. 
CHARLES Q. TIRRELL, MASS. HENRY M. GOLDFOGLE, N. Y. 

JOSEPH HOWELL, UTAH. CLAUDE KITCHIN, N. C. 

WILLIAM H. GRAHAM, PA. EZEKIEL S. CANDLER, Jr., MISS. 

GEORGE E. WALDO, N. Y. DORSEY W. SHACKLEFORD, MO. 

GRANT E. MOUSER, OHIO. JAMES O. PATTERSON, S. C. 

CHARLES A. LINDBERGH, MINN. JOHN A. M. ADAIR, IND. 

WILLIS C. HAWLEY, OREG. ELMER L. FULTON, OKLA. 

IRA W. WOOD, N. J. 

A. P. MYERS, CLERK. 

J. W. GARDNER, ASSISTANT CLERK. 



WASHINGTON 

GOVERNMENT PRINTING OFFICE 
1909 



[H. R. 6041, Sixtieth Congress, first session.] A * 

A BILL For the relief of the Bath Iron Works and others. 

Be it enacted by the Senate and House of Representatives of the United States of America 
in Congress assembled, That the Secretary of the Treasury be hereby authorized and 
directed to pay, out of any money in the Treasury not otherwise appropriated, to the 
several builders of the twelve torpedo boats and sixteen torpedo-boat destroyers 
authorized by the act of Congress making appropriations for the naval service approved 
May fourth, eighteen hundred and ninety-eight, namely, the Bath Iron Works, of 
Bath, Maine; the George Lawley and Son Corporation, of Boston, Massachusetts; 
the Fore River Ship and Engine Company, of Quincy , Massachusetts ; the Gas Engine 
and Power Company, and Charles L. Seabury and Company, Consolidated, of New 
York; Lewis Nixon, of the Crescent Shipyard, of JElizabeth, New Jersey; the Harlan 
and Hollingsworth Company, of Wilmington, Delaware; the Maryland Steel Com- 
pany, of Baltimore, Maryland; the Columbia Iron Works and JDry Dock Company, of 
Baltimore, Maryland; the W. R. Trigg Company, of Richmond, Virginia; the Union 
Iron Works, of San Francisco, California, the fair average cost of said boats without 
profit, as determined by the board of naval officers of which Rear- Admiral F. M. 
Ramsay, United States Navy, retired, was president, and as specified in their report 
to the Secretary of the Navy dated April ninth, nineteen hundred and two, namely, 
two hundred and twenty-four thousand three hundred dollars for each torpedo boat, 
and three hundred and seventy-four thousand two hundred dollars for each torpedo- 
boat destroyer, deducting from said sums for each boat satisfactorily completed and 
delivered the amount already paid said firms on account of said boats. 

Sec. 2. That this act shall take effect upon its passage. 



[H. R. 15101, Sixtieth Congress, first session.] 
A BILL For the relief of the Bath Iron Works and others. 

Be it enacted by the Senate and House of Representatives of the United States of America 
in Congress assembled, That the claims of the Bath Iron W T orks, of Bath, Maine; the 
George Lawley and Son Corporation, of Boston, Massachusetts; the Fore River Ship 
and Engine Company, of Quincy, Massachusetts; the Gas Engine and Power Com- 
pany, and Charles L. Seabury and Company, Consolidated, of New York; Lewis 
Nixon, of the Crescent Shipyard, of Elizabeth, New Jersey; the Harlan and Hollings- 
worth Company, of Wilmington, Delaware; the Maryland Steel Company, of Balti- 
more, Maryland; the Columbia Iron Works and Dry Dock Company, of Baltimore, 
Maryland; the W. R. Trigg Company, of Richmond, Virginia; the. Union Iron Works^.. 
of San Francisco, California, be, and they are hereby, referred to the Court of Claims 
with jurisdiction to. ascertain and find the difference between tnlTamount actually 
paid and the cost to them, respectively, for the construction of torpedo boats and 
torpedo-boat destroyers, pursuant to the act of May fourth, eighteen hundred and 
ninety-eight, and to enter judgment therefor, notwithstanding the bar of the statute 
of limitations: Provided, That no suit shall be brought under the provisions of this 
act after six months from the passage thereof: Provided further, That either the Gov- 
ernment or claimant may offer the findings of the Ramsay Board as to the fair average 
cost of said vessels, which shall be received, as prima facie evidence thereof. 

Note. — The Neafie & Levy Ship and .Engine Building Company, Philadelphia, 
Pa., was omitted from both bills by mistake. 
2 

D, OF D. 

FEB 17*909 



Cj 



TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 



Committee on Claims, 

House of Representatives, 

Tuesday, January 19, 1909. 

The committee met at 10.30 o'clock a. m., Hon. James M. Miller 
(chairman) presiding. 

Present as of counsel for the claimants, Hon. Frank W. Hackett, 
of Washington, D. C. ; Henry W. Dunn, esq., of Boston, Mass.; 
Clarence W. De Knight, esq., of Washington, D. C. 

The Chairman. This matter before the committee this morning is 
the claim of the Bath Iron Works and others. We are ready to hear 
you, gentlemen. 

STATEMENT OF HON. FRANK W. HACKETT, OF WASHINGTON, 

D. C. 

Mr. Hackett. Mr. Chairman, we want to thank the committee for 
according us the privilege of coming here. I will take up only a 
moment's time, because we have here a gentleman from Boston who 
has made a thorough study of this case, and who is prepared to state 
all the facts; and more than that, he would welcome questions from 
the committee. All I want to say is this, that we come here upon the 
recommendation of the Secretary of the Navy, and we are not asking 
anything more than is right and fair and such as I believe that every 
member of this committee, if he understands the facts, will agree is 
right and fair. This is one of those cases where it is very easy to go 
wrong if you do not know all the facts, and the facts are difficult of 
ascertainment. I want to thank certain members of this committee 
who appear in the reports of these previous hearings to have asked 
questions showing that they have studied the subject. One or two 
of them are here to-day, and it is those members of the committee 
particularly that we wish to reach. We have nothing but the desire 
that pertinent questions be put by members of the committee. All I 
want to say before I sit down is this, that I would not be here and 
Mr. Powers would not be here representng these claims if we did not 
honestly believe that this was a case where the Congress would be 
only too glad to make restoration provided they see their way clear 
to do it. 

This is not the ordinary case of a man who is supposed to know all 
the matters of a business and undertakes a business risk and fails in it. 
It is n^t that at all. These shipbuilding firms — and it is very important 
that they should be encouraged in their work so that in time of war 
we may have those firms to go to — these people honestly and fairly sat 

3* 



4 TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 

down with the government representatives at the Navy Department 
and started in on something that was entirely new to them. That is 
down at the bottom of this whole thing, that the project was a "new 
one. They did the best they could, and they supposed that the upset 
price set by the Government was enough to cover the expenditures ; 
but through no fault of theirs it turns out that they have lest a great deal 
of money. We are not here asking a cent of profit, nor are we asking 
that the figures be made so as to include all the items of cost, because 
when you get down to the bottom of it you find that the Ramsay 
Board does not include all the items. The work was done, the boats 
were built, and the Government got the boats, and all we ask is that 
the Government will pay not what those boats cost but a very con- 
servative estimate of their fair value, which is less than they actually 
cost. 

With these remarks merely as introductory, I want to present to 
the committee Mr. Henry W. Dunn, of Boston, who is associated with 
Mr. Powers and a member of his firm, Mr. Powers not being able to 
be here to-day. 

Mr. Kitchin. I believe it is understood that the Government did 
not fool or deceive any of these firms or contractors? 

Mr. Hackett. No; no intentional deception in this case at all. 

Mr. Kitchin. And that the contractors took the contracts with 
their eyes open? 

Mr. Hackett. They took them, relying on the government esti- 
mates, which they supposed to be sufficient. 

Mr. Kitchin. And they are asking now the difference between the 
contract price and what it actually cost them? 

Mr. Hackett. Less than it actually cost them. 

Mr. Kitchin. They have made a loss — they had a loss on the con- 
tracts — and they want the Government to make that good? 

Mr. Hackett. Yes; that is true, except that they don't ask for all 
their loss. 

Mr. Kitchin. You would not advise that as a general principle for 
the Government to go on, to make contracts with folks, and then have 
it understood that the Government would sustain all losses? 

Mr. Hackett. Of course not, Mr. Kitchin. 

Mr. Waldo. Does it not appear in the evidence that there are one 
or two of these companies that did not make any loss? 

Mr. Hackett. Yes; not two. I think the Union Iron Works, of 
San Francisco, was the only one. 

Mr. Waldo. The Bath Iron Works made a loss? 

Mr. Hackett. The Bath Iron Works lost $189,000. 

Mr. Waldo. The Union Iron Works, of San Francisco, did not? 

Mr. Hackett. They did not lose, I believe. 

Mr. Dunn. Oh, ves. 

Mr. Hackett. Mr. Dunn knows about that. 

Air. Dunn. Yes, they did. I want to step right in there. 

The Chairman. Very well, we will hear Mr. Dunn. 



TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 



ARGUMENT OF HENRY W. DUNN, ESQ., OF BOSTON, MASS., REPRE- 
SENTING THE BATH IRON WORKS, OF BATH, ME., AND THE 
OTHER BUILDERS. 

Mr. Dunn. The Union Iron Works lost a large sum on their con- 
tract, Mr. Chairman. 

Mr. Waldo. Was there not one of the companies that did not make 
a loss ? 

Mr. Dunn. No; there was none. The fair average cost, as reported 
by the Ramsay Board, which it is proposed to pay to the contractors, 
was an average sum so as to make the price received by everybody 
the same. Now, that fair average cost would give to the Union Iron 
Works something like $20,000 over and above the $351,783 that they 
reported their boats to have cost them. 

Mr. Waldo. How much loss do they claim to have made? 

Mr. Dunn. Their contract price was $294,610. The actual cost to 
them, as reported, was $351,783. In other words, they lost about 
$57,000 per boat, or $171,000. Not only is it true that the sum they 
would receive under this bill would be only a very small figure over 
the actual cost which they reported, but the actual cost which they 
reported does not include some items of their foss. I was intending 
to come to that later. 

Mr. Waldo. You may proceed in your own way. 

Mr. Dunn. I might as well say right here that all of these con- 
tractors lost very largely from the increase in general expense by rea- 
son of delays, partly through not getting materials and partly through 
delay over the approval of plans and the working out of designs, and 
this increase in the general expense does not appear in the figures 
reported or the relief asked. Of course the item of general expense 
in any manufacturing business is a very large item, and it is a large 
item in the case of these shipbuilders. This includes such things as 
salaries of general officers, clerks, stenographers, engineers, firemen, 
foremen and superintendents, office expenses, taxes, insurance, 
freight, power, light, heating, water rates, depreciation of plant and 
buildings, repairs, advertising, legal charges, telegraph, telephone, 
and so forth. 

Mr. Waldo. These companies were building other ships meanwhile; 
this was not their only business that they had? 

Mr. Dunn. Yes; but of course every manufacturer, if he is not 
going to do business at a loss all the time, has to charge, to all the busi- 
ness that is getting the benefit of this general expense, a certain por- 
tion of the general expense. This charge is determined by ascertain- 
ing the average ratio of the total general expense of the concern to the 
total cost of labor (in some yards labor and material) on all the work 
done in the yard and then adding to the labor cost of each piece of 
work (or laoor and material cost) the percentage thus ascertained. 
If all the work in the yard proceeds at normal speed, this percentage, 
added to the labor cost (or labor and material cost) of each piece of 
work, will cover the total general expense. 

Now, the amount that ought to have been and would fairly have 
been chargeable to these boats on account of general expense was of 
course exactly twice as large if it took twice as long for a boat to build. 
But, nevertheless, in the figures of actual cost which they reported to 



6 TOKPEDO BOATS' AND TORPEDO-BOAT DESTROYERS. 

the board and in the figures of fair average cost that the Ramsay Board 
made up they added the same percentage of the labor cost for general 
expense as if there had been no delay. 

For example, suppose a boat would have taken two years to build 
with no delay and the labor cost would have been $100,000, and 40 per 
cent of that, or $40,000, would have been added for general expense. 
If by reason of delays the boat actually took four years to build, the 
labor cost would undoubtedly be somewhat increased, but nowhere 
near doubled, while the charge for general expense ought properly to 
be doubled. That worked out in this way. Suppose the delay in- 
erased the labor cost to $110,000. The same percentage was added 
for general expense— 40 per cent of $110,000, or $44,000. Yet the 
charge for general expense, to make the builder whole, ought to have 
been, not $44,000, but $80,000. In other words, the figures reported 
include practically no allowance for increase in the general expense 
chargeable to the boats by reason of delay, although that was, in fact, 
an element representing a loss of a great many thousands of dollars to 
the contractors, because this work took up space in the yards and 
required attention from their force, which for the time being could not 
be given to other work, commercial work, and while the work on the 
boats was delayed and held up the general expense was going right on 
all the time. 

Mr. Waldo. Is it your claim that this delay was caused bv the 
Government ? 

Mr. Dunn. A considerable part of it was, as I shall show later. I 
do not want to go into that now. But the point I am making is that 
the figures which the Union Iron Works returned as their actual 
cost, which are slightly less than the fair average cost fixed by the 
Ramsay Board, do not include that item of increased general expense, 
which was, as all the builders testified, a very large item. If that 
item were included, undoubtedly the cost would exceed the fair 
average cost fixed by the Ramsay Board. 

Mr. Kitchin. You speak of the general expenses, such as salaries, 
and so forth. What per cent does that bear to the total? 

Mr. Dunn. The Ramsay Board went into that question. They 
investigated the methods used by a great many of the contractors, 
and finally adopted the method used by the oldest yards, which had 
the oldest established business, and therefore charged the lowest 
percentage for general expense, and that method was to charge 

The Chairman. What page is that on? 

Mr. Dunn. I have before me the statement made by the committee 
of builders, Mr. Myers and Mr. Bowles and Mr. Wilson, and that is 
referred to on page 15. The percentage finally fixed by the board 
was 45 per cent of the cost of labor alone for the destroyers and 50 
per cent for the torpedo boats. You will find this on page 16; that 
is to say, to the cost of labor, which was about 44 per cent, I believe 
of the entire cost of the work, they added 45 per cent of that, which 
would be about 16 per cent of the entire cost of the work, as the fair 
proportion of general expense, that being the proportion which 
the experience of the older yards had found came out accurately, 
and just about repaid those expenses in ordinary commercial work. 

Mr. Kitchin. My difficulty is this: Suppose a boat would cost a 
million dollars; what per cent of that would be the general expense 
voti refer to? 



TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 7 

Mr. Dunn. It would be, roughly, 15 or 16 per cent. 

Mr. Kitchin. And what per cent of it would be labor? 

Mr. Dunn. Roughly, 44 per cent of what was left after you had 
taken out the general expenses. 

Mr. Kitchin. And the balance would be material? 

Mr. Dunn. Yes. 

Mr. Kitchin. I believe Admiral Bowles testified ~that 14 per cent 
would be general expense and 31 per cent would be labor and 56 per 
cent would be material. That is about right, is it not? 

Mr. Dunn. I think there was a misunderstanding there between 
Mr. Bowles and the committee, or perhaps I misunderstand him. 
He said the labor cost was 44 per cent. 

Mr. Kitchin. That included the general expense and labor cost. 

Mr. Dunn. I am not sure that it does, 

Mr. Kitchin. Here is what he testified to on page 13 of the hear- 
ings of 1904. He said that the material cost was 56 per cent. 

Mr. Dunn. Yes. 

Mr Kitchin. That the general expense and the labor cost was 44 
per cent. He said that 31 per cent was labor' and the balance general 
expense. 

Mr. Dunn. Yes, but he comes to this conclusion. He testified 
when you asked him, as follows: 

Mr. Kitchin. Thirty-one per cent of 44 per cent would be about 60 per cent, then? 
Admiral Bowles. Yes, sir. 

That is evidently incorrectly reported, but it indicated to me that 
his 44 per cent did not include the general expense, which was to be 
added to that. Then, in answer to Mr. Butler, he testified as follows: 

Mr. Butler. Suppose a contract would be $100; $56 of it would be set apart for 
material? 
Admiral Bowles. Yes, sir. 

Mr. Butler. Forty-four dollars of the $100 for labor? 

Admiral Bowles. Yes, sir; and about $14 for expense. " 

Mr. Butler. To which Mr. Kitchin has just referred? ._«, 

Admiral Bowles. Yes, sir. 

The Chairman . That would make a total cost raised $114 on the basis of his estimate? 
Admiral Bowles. Yes, sir. 

Mr. Kitchin. Then he expressly said that 31 per cent of the 44 
per cent would make the 14 per cent — about 14 per cent? 

Mr. Dunn. If that is what he meant, then that makes 31 per cent 
for labor, 13 per cent for general expense, and 56 per cent for material. 

Mr. Weeks. I was talking with Admiral Bowles about that general 
proposition just two or three months ago, and he said something less 
than one-half would be general expense and labor, a trifle more than 
one-half material. He said it might vary somewhat, depending on 
the character of the ship that was being built . 

Mr. Dunn. That confirms the statement made here. 

Mr. Kitchin. Yes. 

Mr. Dunn. I think, however, that Mr. Bowles was in error when he 
said that the Ramsay Board added 31 per cent of the labor cost for 
general expense, and that the figures given on page 16 of the " State- 
ment of the builders" are the correct ones. I will submit later a 
table to be printed with this argument, showing the elements making 
up the fair average cost reported by the Ramsay Board. 

I want to say just one word more about the figures of the Union 
Iron Works. A great many different ways might have been taken to 



8 TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 

fix this compensation. As a matter of fact the Navy Department 
chose to adopt a method which would make the price the same to all 
the builders, and the price that it is proposed to pay will still leave, 
even on these, reported figures which do not include the increase in 
general expense, a loss to all the other builders running from a small 
sum to as much as $50,000 or $75,000 per boat; in fact, some of the 
builders, 6 of the* builders, will still be out of pocket on all their boats 
more than $100,000 after this price has been paid. 

As to the difference between the cost of the boats of the Union 
Iron Works and those of the other 10 builders, which were all very 
much higher, the only evidence I have is that a comparison of the 
detailed statements shows that the requirements imposed upon them 
as to miscellaneous fittings and equipment were very much lower 
than those imposed upon the other builders. Their hulls and their 
machinery cost more than those of the Fore River Company, which 
has one of the largest losses. They were let off immensely easier on 
the electric plant, miscellaneous equipment, and fittings, matters which 
were largely in the discretion of the government inspectors. The 
fact is that they will not make $20,000 profit, because of the increase 
in general expense which is not allowed for. They will come out 
probably about whole. The others will still lose, and several of them 
more than $100,000. Now, if the builders are satisfied with that in- 
equitable method of distributing the compensation asked for, I sup- 
pose — I had assumed — that the committee would be equally satisfied. 
The builders might very well have asked that the compensation be 
graded according to their losses. They did not choose to do so; the 
other method was so much the simpler and was the one adopted. 

What I have said thus far has been merely preliminary, and in 
answer to the question that was asked about the loss of the Union 
Iron Works. Incidentally I have referred to the fact, which I would 
like the committee to bear in mind, that none of the builders in re- 
porting their actual cost included any increased allowance for general 
expense because of delay, and the Ramsay Board does not make any 
such increased allowance. In other words, there is one item of loss, 
which the builders who testified before this committee said was a 
very serious one, which is not included in any of the figures reported 
or in the compensation asked for. It is, moreover, an item which 
might very properly have been included, because it was the result of 
delay, and, as I shall show you later, the delay was very largely the 
fault of the Government. 

Now, I want to start in at the beginning of this matter and state as 
nearly as I understand it what is the basis of the whole contention. 
Under the act of 1898 11 firms contracted to build 12 torpedo boats 
and 16 destroyers. It was not a case, as suggested in one of the 
hearings, of inexperienced builders excluding experienced builders 
by low bids. The only experienced bidder that did not get a boat 
was the Herreshoff Manufacturing Company. Their bid came in 
after the bids were closed, and it was one of the highest of the bids, but 
not as high as one or two of the others that were accepted. The other 
people who were not awarded contracts — there were only two or 
three — were those who were wholly without experience in building 
government vessels, and one of them had no experience in any part 
of the shipbuilding business. The average contract price was about 
$153,000 for the torpedo boats. 



TOEPEDO BOATS AND TOEPEDO-BOAT DESTBOYEBS. 9 

Mr. Waldo. Will you state what the actual bids and actual prices 
were of each concern? 

Mr. Dunn. The Bath Iron Works's bid for torpedo boats was 
$161,000; George Lawlev & Son Corporation bid $163,000; Lewis 
Nixon bid $167,000; William R. Trigg Company bid $131,000. Those 
figures I am reading include a small amount of extras. Perhaps Triad 
better give the exact contract prices here on pages 9 and 10 of 
S. Doc. No. 112, with which the committee are familiar. It was that 
document in which Secretary Long forwarded a great many papers 
to the Senate committee. The exact contract prices are given. 
They are as follows: The Bath Iron Works, $161,000; George Lawlev 
& Sons, $159,400; Lewis Nixon, $165,000; William R. Trigg & Co., 
$129,750; the Gas Engine and Power Company, $146,000; the 
Columbian Iron Works, $168,000; the average being over $152,000. 

For the destroyers Neafie & Levy bid $283,000; William R. Trigg 
&Co., $260,000 -/Harlan & Hollingsworth, $291,000; the Fore River 
Company, $281,000; the Union Iron Works, $285, 000,- the Gas Engine 
and Power Company, $282,000; and the Maryland Steel Company, 
$286,000; averaging" $28 1,750. 

Mr. Kitchix. Are those the torpedo-boat destroyers? 

Mr. Dunn. Yes; those are the torpedo-iboat destroyers. This is 
all given in S. Doc. No. 112, of the Fifty-eighth Congress, second 
session, at pages 9 and 10. I have here three books to which I am 
referring. I have that document, and the record of the hearings 
before the House committee, beginning November 25, 1904, and 
extending to March 9, 1905, where testimony was taken, and the 
record of the Senate hearings in 1904. 

Mr. Kitchin. Right along in that connection; that was the con- 
tract price. Now, give what they estimated it actually cost them to 
build these boats. 

Mr. Dunn. That is exactly what I was going to give next. The 
average contract price, including extras, was $154,580 for the tor- 
pedo boats. 

Mr. Waldo. We do not care about that. Let us have the actual 
price of each company set opposite what it cost them. 

Mr. Dunn. You would like to have all in detail? 

Mr. Kitchin. If you have not those figures you can put them in 
afterwards. 

Mr. Dunn. I have those figures right here. Now, I want to say 
one word to correct the misapprehension that apparently arose at 
one of the previous hearings of the committee. There was a small 
amount of allowances for extras amounting to a very few thousand 
dollars in all these millions of dollars involved. The changes that 
were made in the designs as the work went along, which I shall have 
to refer to later, were 99 per cent of them changes that were permitted 
within the general language of the specifications and for which no 
extras were allowed. I want to say that, because the reference to 
extras that I have got to make might otherwise be misunderstood. 
I doubt if the amount of extras allowed to any one builder here 
exceeded $5,000 in any one case. The allowances for extras can 
practically be disregarded. In the figures that are given in this 
"Statement of the Builders," on page 13, you have the contract prices 
adjusted so as to include the extras or allowances. If a man did get, 
as one company did get, $2,000 of extras allowed, the price I give is 



10 TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 

the price he received, both contract price and extras, so that it makes 
it more accurate on the actual loss. The figures of actual cost in the 
'''Statement of the Builders" are also more accurate, because later 
than those on page 9 of Senate Document 112. 

The Bath Iron Works, contract price, and extras and deductions, 
$161,517. Actual cost reported to the committee, $224,614; actual 
loss, $63,097 on each of three boats, or very nearly $200,000. 

George Lawley & Sons, contract price and extras, $163,884; actual 
cost, $273,157; actual loss, $109,273 on the first boat. The second 
boat apparently cost them a little less for completion, $263,666 for 
actual cost and $163,511 for contract price and extras. The loss was 
$100,155. 

Lewis Nixon, the contract price was $167,212.14; actual cost, 
$278,827; loss on each boat (two boats), $111,614; total, $223,000 for 
two boats. 

William R. Trigg Company, the contract price and extras on the 
first boat were $131,914; actual cost, $243,741; less, $111,827. Con- 
tract price and extras on the second boat, $127,861; actual cost, 
$243,741; loss, $115,880. On the third boat the figures are sub- 
stantially the same as on the first, the actual loss being $112,601. 

The Columbian Iron Works, the contract price was $168,770, the 
actual erst was $289,491, and the loss on one boat was $120,720. 

The Gas Engine and Power Company, the contract price was 
$148,906, the actual cost was $243,189, and the less was $94,282. 

Would you like each of the destroyers separately read? 

Mr. Waldo. I see you have all the figures there. It is not neces- 
sary to read them. 

Mr. Dunn. It is given on page 13 of this statement of the com- 
mittee of builders. 

Mr. Waldo. That is their statement and not the hearing? 

Mr. Dunn. This is a statement cf the committee, consisting of 
Mr. Bowles, Mr. Myers, and Mr. Wilson. I would state to the gentle- 
man that those figures -are all taken from tables that are in the papers 
before the committee. 

Mr. Kitchin. Filed by the Eamsay Board? 

Mr. Dunn. The returns of actual ccst to the Eamsay Board were 
partly estimated, most of the boats not being entirely completed. 
Corrected figures were later submitted at the hearings before this 
committee and the Senate committee in 1904, and the corrected fig- 
ures are used in the "Statement of the builders." The differences 
are slight. 

Now, to lump these results and give simply an idea cf where we 
start in: On an average contract payment of $154,580 for torpedo 
boats there was an average actual ccst of $252,685, nearly $100,000 
more; and on the average contract price of $286,689 for destroyers 
there was an average actual ccst of $411,654, or almost $125,000 loss. 
There are two things of great importance that I want the committee 
to note in regard to these figures of actual cost. In tKe first place 
they do not include any profit or interest on the investment, or any- 
thing cf the sort. They do not represent what the price ought to 
have been to correspond with the usual contract. They represent 
actual ccst without any interest or profit. In the second place they 
do not include, as I have stated, any proportionate allowance for the 



TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 11 

increase in general expense resulting from the delay in the building 
of these beats. 

Mr. Kitchin. Were these boats — or these torpedo boats — all of 
the same kind, the very same? I see there is a little difference in 
the prices in the bids. Was that made because the boat was a 
little differently described or was a little different ? 

Mr. Dunn. No, sir; most of these were built on the department's 
designs and substantially similar in the main outlines, although, 
as I will point out later, most of the details were worked out by the 
superintending constructor, and they differed in details as they were 
finished. The Bath Iron Works bid on their own plans and had a 
fight for it to get certain details of them accepted. Their boats 
were smaller than the others and were built on different plans, and 
they were the most successful and were very nearly the most costly 
per ton of displacement. 

Mr. Kitchin. They just took them in groups, two and three 
and one? 

Mr. Dunn. The act of Congress provided that not more than a 
certain number of torpedo boats and a certain number of destroyers 
should be given to any one firm, the object being, evidently 

Mr. Kitchin. To get the work done quickly? 

Mr. Dunn. Partly to get the work done quickly, and partly to 
give a lot of yards experience in building such boats, so that there 
would be competition in the future. Only a few yards had been 
building them previously, and they did not want to be limited to 
the Bath Iron Works and one or two others for their torpedo boats. 

Mr. Kitchin. Do you know which one of these yards had built 
torpedo boats before? 

Mr. Dunn. I shall have occasion to go into that in a very short- 
time. I think it is of the greatest importance. But before I do that 
I want to state a fundamental proposition. You will see that the 
contract price was a certain amount, and the actual cost was away 
up in the air above it. Now, is that because the cost was too high or 
because the contract prices were too low? If this were a case where 
the contract prices were reasonable and normal prices at the time, 
and abnormal conditions caused an abnormal cost — that is, a cost that 
would not be expected to be repeated, that does not represent the 
ordinary fair value of such boats 

The Chairman. I know, but when contractors take a contract do 
they not assume that risk? 

Mr. Dunn. I think they do. May I just finish what I was saying ? 

The Chairman. Certainly. 

Mr. Dunn. I say, if this were a case where ordinary proper prices 
were made, and certain conditions, of which the contractors took the 
risk, abnormally increased the cost, then prima facie the contractors 
ought to stand the loss. But if this is a case where the cost was a fair, 
ordinary, normal proper cost for the product and the bids were utterly 
inadequate, representing prices at which such boats could never have 
been built at any time in any country, the claim of the builders pre- 
sents a very different question. Now, mainly we have here the latter 
situation. There were certain elements representing a small figure 
in the actual cost of these boats that were due to a rise in the price 
of material and labor, which was a risk the contractors took, and 



12 TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 

there were some elements doubtless, in the cases of individual con- 
tractors, due to some mistakes of their own; but the prices fixed by 
the Ramsay Board, which are far less than what the boats cost the 
contractors, were as low prices as those boats could ever have been 
built for in any country at any time. The prices so fixed represent a 
very conservative estimate of the fair value of the boats when they 
were completed, and what the Government has paid for the boats is 
much less* than they are worth. It is the contract prices that were 
wrong, inadequate prices rather than excessive cost. That fact 
being understood, we must next inquire how it happened and whose 
fault it was that such inadequate prices were fixed, prices at which, 
if every condition had remained just as it was, it would have been 
impossible to build such boats. 

Mr. Kitchin. I understood you to say that when a contractor 
took a contract the price was normal and it was a normal and fair 
price. 

Mr. Dunn. I beg your pardon; that is just what I did not say. I 
said that the question which was to be asked was whether that was 
the case, or whether, on the contrary, the cost was normal and the 
price abnormally low. Now, I have just tried to answer that question. 

Mr. Waldo. It is all shown in the evidence that was before us? 

Mr. Dunn. Yes, sir; it is all shown in the evidence, including in 
that term the papers, reports, etc., embraced in Senate Document 
112, Fifty-eighth Congress, second session, and those submitted to this 
committee and the Senate committee in 1904. 

Mr. Waldo. Do you remember what the price per ton was on the 
original estimate? 

Mr. Dunn. We have some interesting evidence here on just that 
point. 

Mr. Kitchin. I tell you what bothers me in this matter, and I want 
you to explain it. It looks to me like when the Government appro- 
priated this amount of money and let out these bids all your ship- 
builders got together and said, "The Government has appropriated 
so many million dollars, and we will go in and bid and just take it all." 
It looks to me like all of these fellows, instead of having a real com- 
petitive bidding, pooled together; and the nearness of the prices of 
all of them to each other convinces me that they had a pool, or that 
those prices are bound to have been normal, because each one of 
these ten or twelve boat-building concerns could not have figured it 
out to a cent and their prices so approximated the prices of the other 
bidders. Now, it is either one or the other, it strikes me. 

Mr. Dunn. I want to answer that question. The price of the 
William K. Trigg Company, the lowest on the torpedo boats, was 
$129,750, and the bid of the Columbian Iron works was $168,000. 

Mr. Kitchin. As I remember, it was the Trigg man who said that 
was about the size of the situation; that they thought the Govern- 
ment had appropriated enough to do it, and they came in and bid the 
government price. 

Mr. Waldo. They bid below the government price; that is the 
trouble. 

Mr. Dunn. Below the government appropriation? I am coming 
in -a moment to the way in which they made up their estimates; 
they certainly didn't figure it out to a cent, because they couldn't. 



TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 13 

Mr. Hawley. Those two bids you referred to a moment ago, were 
they on the same kind of boat? 

Mr. Dunn. On the same kind of boat, exactly. 

Mr. Kitchin. I do not think they had had much experience in 
bidding. These other boat fellows had had a lot of experience with 
the Government, and it did not look like the Trigg Company went 
into that field. 

Mr. Dunn. Leaving out the Tri^g Company, the bids still vary 
from $146,000 to $168,000. There is not a particle of evidence that 
has ever been unearthed by the naval bureaus, or by the Ramsay 
Board, or the committee that was sent around to examine these 
boats when building, of any combination between builders. If they 
had combined they certainty would have bid practically the upset 
price of the Government instead of large sums under it. There is a 
considerable variation in the bids on both types of boats. There 
was in fact no combination whatever. They did bid, each of them, 
separately, as near the upset price as they dared, and I shall presently 
tell you why. 

Mr. Kitchin. If the contract price that they bid — the price that 
they bid — was not a reasonable price, will you please explain why 
their prices are so near together as all of them are ? 

Mr. Dunn. May I postpone that a little bit? I'm coming to that 
very point, which is an important one. 

Mr. Kitchin. Very well. 

Mr. Dunn. I am going into detail as to just how they fixed the 
prices that they bid. First, however, I want to show some of the 
figures that were asked for by another gentleman here in support of 
what I have said about the actual cost of these boats. Take first the 
torpedo boats. The average contract price (with extras) compared 
with the average contract displacement gives a cost per ton of dis- 
placement of $948. That is the contract price. The Government's 
upset price and limit of displacement gave a cost per ton of displace- 
ment of $1,000. The fair average cost, as determined by the Ramsay 
Board after visiting a great many of these works and cross-examining 
and going into this thing carefully, was $1,180 per ton of actual dis- 
placement, and the average actual cost was $1,329. The contract 
price was $948. It never could have been done for that in the world, 
anywhere. The limit allowed by the Government in its upset price, 
taking its limit of displacement, was $1,000. 

Mr. Waldo. One thousand and thirty dollars, was it not? 

Mr. Dunn. If you take the low limit, I think it might come to that. 
If you take the high limit, which I took because even that was found 
to be an inadequate limit for these boats, it is $1,000. The adver- 
tisement was for a displacement not to exceed 170 tons, and the upset 
price was $170,000. The Ramsay Board's figures, taken in connection 
with the average actual displacement, give $1,180, and the average 
actual cost was $1,329. 

The contract price of the most successful torpedo boats ever built 
before this, the DaMgren and the Craven, built by the Bath Iron 
Works at a small loss — and that is not included in this bill — was 
$1,325 per ton of displacement. The actual cost of the torpedo boats 
built under this act of 1898 by the Bath Iron Works, who had the 
advantage of obtaining plans from the leading French builder, and 



14 TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 

more previous experience than anybody else, and who got the best 
results, was $1,369 per ton of displacement. 

The Ramsay Board asked the Bureaus of Engineering and Equip- 
ment, in the light of the experience they had gained from the actual 
working out of the designs for the machinery and equipment of these 
boats, to furnish an estimate — not based on any inquiry into the 
actual costs, but on what they knew of the conditions and needs — 
an estimate of the proper cost of the machinery and equipment for 
these torpedo boats. That estimate, as furnished by the bureaus, 
totaled $116,375. That does not include the installation of outfit, 
any part of the hull and hull fittings, or any allowance for trials. By 
comparison with the actual cost of a great many of these boats I find 
that the equipment and the machinery, which are the two things on 
which the bureaus gave estimates, represent generally less and hardly 
ever more than half of the total cost. In other words, taking that 
proportion as correct — and it runs pretty close to that — you would 
nave from the bureaus' estimates a total cost of $232,000 for each 
torpedo boat, against the Ramsay Board's fair average cost of $224,300 
and an actual average cost of $252,685. 

In the case of the destroyers there is still more evidence available 
as to the actual cost being a proper normal cost. The contract 
price (with extras) per ton of contract displacement was $685. The 
upset price, taking the largest displacement the Government allowed, 
was $678 per ton of displacement. The Ramsay Board says the fair 
average cost was $374,200, which is $803 per ton of actual displace- 
ment. The average actual cost was $883 per ton of displacement; 
and an expert on English torpedo-boat destroyer construction who 
testified before the House Committee on Naval Affairs before this 
bill came up, and whose testimony is attached at the end of the 
House hearings in 1904, said that for building 275-ton destroyers the 
Englishmen always got $290,000, which is $1,054 per ton of dis- 
placement. 

Mr. Kitchin. Were these of the same speed? 

Mr. Dunn. They were of somewhat higher speed, but of much less 
exacting requirements as to the equipment, fittings, habitability, and 
so forth, which much more than offset it. I shall come to that later. 
About the time these boats were built the Englishmen had increased 
the size of their boats and were building boats from 300 tons up, some 
nearly 400 tons. Mr. Bowles made an investigation of the actual cost 
per ton of these boats, and it was $894 per ton, as against the Ramsay 
Board's report here of $803 per ton. Now, of course, the smaller the 
boat the larger the cost per ton of displacement, so that $803 per ton 
as fixed by the Ramsay Board for a 466-ton boat is not so very much 
under $891 per ton for a 300 or 340 or 350 ton boat; but certainly, on 
the y« hole, carrying the usual proportion, it indicates a lower cost than 
that fixed by the Englishmen. On the other hand, the English 275- 
ton destroyers that Mr. Piatt testified about before the committee, 
being much larger than our torpedo boats, ought to have cost con- 
siderably less per ton of displacement. According to his figures they 
were costing $1,054 per ton of displacement, while the contracts for 
our torpedo boats were only $948, with an upset price of $1,000, per 
ton of maximum displacement. They were building boats nearly 
twice as large over there and paying more per ton of displacement for 
them. I will say that the actual trial displacement of these boats is 



TOKPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 15 

'given on pages 11 and 12 of the hearing before the Senate Committee 
on February 25, 1904. There are some tables in the evidence which 
have columns for displacement and cost per ton, but they give con- 
tract displacement and not actual displacement. 

Now, the bureau estimates on the machinery and equipment for the 
torpedo-boat destroyers, as furnished to the Ramsay Board, repre- 
senting the proper cost of those items with no allowance for hull or 
fittings or trials, amounted to $218,722, as compared with the average 
contract price of $286,689. You see that the general expense and 
the trials would have used up the difference between the two figures 
and left nothing for the hull. Taking the proportion I find runs 
through the figures, it seems that equipment and machinery are about 
half of the actual cost. Those estimates then would indicate a total 
cost of $437,000, as against the Ramsay Board's figures of $374,000 
and the actual cost of $411,000, so that apparently the estimates of 
the bureaus as to what the machinery and equipment ought to cost 
were considerably bettered in actual experience in these boats. 

The last destroyers authorized by the Government, which are now 
building, are 740-ton boats; the}^ are much larger than these boats, 
which average 466 tons. They ought, therefore, to be costing con- 
siderably less per ton of displacement. As a matter of fact, while the 
contract price of the boats in this bill was $685, and the price you are 
now asked to pay is $803, and the actual cost was $883, for these 
much larger boats, the Government is now paying an average con- 
tract price of $865 per ton of displacement. 

Mr. Waldo. Right there let me ask you what, if any, difference is 
there in the cost of material at this time and at the date when those 
boats were built? 

Mr. Dunn. That, of course, is a question that would have some 
bearing upon it. I have not investigated it. 

Mr. Waldo. Some of these builders here ought to know. 

Mr. Dunn. There are three or four of the builders present. Can 
you tell what the present prices of the kinds of materials that go into 
these boats are, compared with the prices that prevailed at the time 
of the building of these boats? I know there is not a gentleman 
present who would touch one of these boats now with a 40-foot pole. 

Mr. Smith. Forgings would not be as high now. 

Mr. Dunn. How about the hull plates? 

Mr. Seabury. There is not very much difference in those. 

Mr. Dunn. When you say the forgings would not be as high, you 
refer to those final prices, $2.36 a pound, that they got up to before 
you got through. 

Mr. Kitchin. These boats they are building now are a great deal 
faster? 

Mr. Seabury. Not in proportion. 

Mr. Kitchin. How many knots? 

Mr. Seabury. The destroyers built under the act of 1898 had a 
minimum requirement of 28 knots. Some of them made 29. 

Mr. Dunn. What are the new ones to make? 

Mr. Seabury. Some of them run 28 and some of them 30. 

Mr. Dunn. And they are very much larger boats, which ought to 
make a higher speed. 

Now, that matter also has been covered by the report of the Navy 
Department. There was a letter presented to the committee at the 



16 TORPEDO BOATS AND TOBPEDO-BOAT DESTBOYEBS. 

last hearing from Mr. Morton, the Secretary, saying that they con- 
sidered the prices it was proposed to pay for these boats to be fair 
compensation for the boats. The Bureaus of Construction and of 
Steam Engineering so reported in approving the report of the Ramsay 
Board, and it is the universal effect of all the department papers on 
this matter. 

I have made that general statement, that the prices you are asked 
to pay are nothing but the fair normal prices for these boats; that we 
are not asking you to allow for the things we ought to have taken the 
risk of; for some artificial running up of the prices of materials which 
represented a very small percentage of the total cost to us; for some 
increase in the price of labor due to the particularly heavy demand 
for labor; for certain costs of that sort. When I say that, I have 
perfectly in mind that the Ramsay Board in making its finding was 
not directed to draw its line in that particular direction. In other 
words, it was not directed to find what the actual cost had been and 
what it would have been at the prices for materials which prevailed 
at the beginning of the contracts. Such an investigation could be 
made, of course, if the committee thought it proper, but as the Ramsay 
Board did omit from its figures some very important items of cost 
that were not conditions that the builders should have taken chances 
on, and as the prices which it is now proposed to pay are somewhere 
around a million dollars less than the total cost of these boats, I 
•think the committee will be satisfied from an examination of all the 
evidence that the figures set by the Ramsay Board are less, rather 
than more, than the normal cost of these boats; and that if in any 
items the actual cost was a little higher than it ought to have been under 
normal conditions, that excess is not included — nor any part of it — 
in the sums that it is now proposed to pay. 

I have stated that the trouble was principally that the prices were 
lower than such boats as were ultimately constructed could ever 
have been built for at any time in any country. That is a conclusion 
that of course I draw from the papers and evidence before the com- 
mittee, and I have supported it by figures taken from those papers, 
and by the opinion officially expressed by the department. 

I want to recall briefly the investigations that have been made. In 
November, 1901, while the boats were under construction, two naval 
officers, Messrs. Linnard and Chandler, were directed to visit all the 
yards on the Atlantic coast and make a report on the boats under 
construction, and they went into this matter of the losses of the 
builders. A joint report was made by the Bureau of Construction 
and the Bureau of Steam Engineering on the same point. The 
Ramsay Board, with Admiral Ramsay at its head, was appointed to 
visit the various yards and take evidence of all kinds and examine 
books and papers, and report. They did so, and their report was 
approved by the Navy Department and was sent to Congress by 
Secretary Long with a recommendation for relief. There have since 
been presented to the committee letters from Admiral Melville and 
from Secretary Morton, and there have been elaborate hearings 
where evidence was taken before this committee in the previous 
Congress and before the Senate committee, the evidence being all in 
the hands of this committee. In fact, the matter has been investi- 
gated by almost everybody except the Secret Service, and if Congress 



TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 17 

is n r t willing to act en anything except a rep rt cf the Secret Service 
in this matter, we are willing to c urt such an investigatkn. 

I shall net have time here to read at length fr:m the evidence in 
suppcrt cf every statement I shall make. If there is any- statement 
that any member cf the committee wants to have supported, I think 
I can turn to the evidence to support it. 

The Chairman. There is one matter I want you to call the atten- 
tion cf the cemmittee to bef re y u get through. I want to know 
whether ycur companies cr any cf them claim that any cf this lrss 
was cccasirned by the fault d the G vernment in any respect? 

Mr. Dunn. We certainly do. I shall come to that before we close. 

The Chairman. I would like to have you point out to the commit- 
tee in what that fault consists. 

Mr. Dunn. That is one of the main heads that I want to cover, 
and cover just as clearly as I can. The trouble is that it is nearly 12 
o'clock now, and how I can possibly say all that I want to I do not 
know. 

Mr. Kitchin. I suggest that you write a brief and put it in the 
record. Every member of the committee will read your brief, as 
every member of the committee read this statement. 

The Chairman. I have read everything but that. 

Mr. Kitchin. I have read the hearings and the Senate document 
and the hearings here. 

Mr. Dunn. I could not make a better brief than this " Statement 
of the builders." It is a fair, complete, and clear statement of the 
facts as deduced from the evidence. It cannot be condensed any more 
and can not be any better stated. I do not believe I could improve 
on it. 

Mr. Kitchin. There is one thing that I forgot to ask you. I 
believe you represent the Bath Iron Works? 

Mr. Dunn. Yes, sir. 

Mr. Kitchin. How long had the Bath Iron Works been building 
ships for the Government before these contracts? 

Air. Dunn. I think I have that information right here. They had 
been building government vessels for a number of years. 

Mr. Smith. Not torpedo boats? 

Mr. Dunn. Not torpedo boats; no, sir. I want to answer Mr. 
Kitchin' s question. 

Mr. Kitchin. I want to see how many times they have been back 
here asking Congress for appropriations to make up losses. Take 
George Lawley & Sons; they had been building for the Government 
before, had they not? 

Mr. Dunn. That was their first and last government contract. 

Mr. Kitchin. And their last? 

Mr. Dunn. Their first and their last. 

Mr. Kitchin. All right. Lewis Nixon had been building, all right, 
had he not? 

Mr. Dunn. They had built a monitor and a cruiser. 

Mr. Kitchin. The Trigg Company; I know they had not been 
building government ships. 

Mr. Dunn. Mr. Trigg had built the engines for the battle ship 
Texas: that was all the experience he had. 

Mr. Kitchin. The Columbian Iron Works, how about them? 

72536— t b d— 09 2 



18 TOEPEDO BOATS AND TOEPEDO-BOAT DESTEOYEES. 

Mr. Dunn. The Columbian Iron Works had done the Detroit and 
the Montgomery, cruisers. 

Mr. Kitchin. How about the Gas Engine and Power Company? 

Mr. Seabuey. They had one boat, not completed. 

Mr. Kitchin. How about Neafie & Levy? 

Mr. Dunn. They had built tugboats, but not torpedo boats. I do 
not know whether they had built any tugboats for the Government. 

Mr. Kitchin. How about the Harlan & Hollingsworth Company? 

Mr. Smith. They had not done anything since building the double- 
turreted monitor the Amvhitrite. 

Mr. Kitchin. They had built some, had they not? # 

Mr. Smith. Not since 1876. 

Mr. Kitchin. How about the Fore River Ship and Engine Com- 
pany? 

Mr. Dunn. They had for three or four years been building small 
boats, commercial boats, but I do not believe they had built any 
government boats. 

Mr. Kitchin. And how about the Union Iron Works? 

Mr. Myees. The Fore River Ship and Engine Company was a new 
concern and had not built many boats for the Government or anybody 
else. 

Mr. Kitchin. There had been a reorganization of the old company. 
Had not the same men been in the boat business before ? 

Mr. Dunn. I can answer that, because I got these data from 
Mr. Bowles. The old company has since been reorganized at a large 
loss because of what they got stuck on this contract, but the old 
company had been going only a short time before these contracts 
were taken, and they had done no government work. They had 
built several small commercial vessels. 

Mr. Kitchin. Had not the managers of the old Fore River Com- 
pany been in a company that had built boats for the Government 
before that? 

Mr. Dunn. No, sir. 

Mr. Kitchin. How about the Maryland Steel Company? 

Mr. Dunn. They had built commercial boats only. 

Mr. Kitchin. That is what I wanted. Those companies had been 
building boats for the Government; and had they not been coming 
back here asking the Government for losses, heretofore? 

Mr. Dunn. Five of the eleven had never had a government contract, 
and the sixth company had not completed its first one. The other 
five had not asked for relief before. 

Mr. Kitchin. No, I do not think they -had come, either. They 
had been making big profits on the Government. Now are they 
going to divide with the Government the big profits that they made 
on their other contracts? 

Mr. Dunn. The Government does not intend that the builders who 
do work for it shall not make a fair profit. 

Mr. Kitchin. Is it fair to make a loss in one case and ask the 
Government to make it good, and at the same time not divide the 
big profits that they have been making in many other cases ? 

Mr. Dunn. There is no evidence of their making excessive profits 
on any work they had done for the Government before. They had 
made only fair profits, and in some cases losses, for which they did 
not ask relief because there were not the same equities. 



TORPEDO BOATS AND TOKPEDO-BOAT DESTROYERS. 19 

Mr. Smith. The navy has been built up at the expense of the ship- 
builders. 

Mr. Kitchin. I am sort of like Mr. Myers in his testimony before ; 
I always had an idea that a government contract was about the best 
thing in this world, especially a naval contract. 

Mr.'CROWTHER. The Neane & Levy Company lost $600,000 on one 
contract. 

Mr. Dunn. The first modern battle ships that were built ruined 
John Roach. 

Mr. Kitcrtn. My first recollection in Congress is of his coming back 
for the money. 

Mr. Dunn. Yes ; and he got a very small proportion of his loss. 

Mr. Smith. It killed him, too. 

Mr. Dunn. It ruined him, and killed him. Only two of the con- 
cerns that took these contracts — two whose plant isn't adapted for 
anything else — would look at a government contract over their 
shoulder now. 

Mr. Kitchin. I am glad to hear it. I am glad to hear that we 
have one department of the Government that can make a good con- 
tract. 

Mr. Myers. No shipbuilder wants a government contract now. 

Mr. Dunn. It isn't a desirable condition to have most of the ship- 
builders of the country unwilling to take naval contracts. It wouldn't 
be desirable in a time of sudden need. 

Now, I want to answer your question as to how it happened that 
they bid just as they did. Those who had built government vessels 
before this were just so much worse off than those who had no gov- 
ernment experience till they took these contracts. The building of 
these special types of vessels to make these high speeds with these 
very light weights is about as much like building cruisers as building 
a flying machine is like building a locomotive. The engine has to 
develop the same horsepower as the engine in a battle ship, and it can 
be only half the weight. Eve^ particular line and angle and plate 
and shape and forging has to be according to new special designs and 
made out of new special material, to come anywhere near getting the 
required speed and the other required conditions. When these con- 
tracts were advertised for, the Government submitted four or five 
general outline plans. There were practically no drawings whatever, 
whereas there had to be later prepared by one contractor 886 detailed 
drawings, prepared and submitted to the department, and many of 
them rejected and made over again. They had no data, therefore, to 
decide on the forgings, angles, plates, and so forth. The specifica- 
tions as to almost everything said "shall be fitted as directed," 
"shall be adjusted as directed by the superintending naval con- 
structor," "shall be of such and such a weight, but additional weight 
may be required," "to be furnished as directed," "additional frames 
may be put in here if directed." 

Mr. Tirrell. Are you speaking about the contracts for these boats ? 

Mr. Dunn. Yes. 

Mr. Tirrell. If the Government under these contracts had insisted 
upon changes being made in regard to all these things that were 
authorized in the contracts, could anyone build such a boat without 
being ruined? 



20 TOKPEDO BOATS AND TOBPEDO-BOAT DESTBOYEBS. 

Mr. Dunn. No, sir. Now, this being true, the builders looked 
over those outline plans and found that the plans gave them no 
definite information as to the amount that would be required of each 
kind of material and the amount of work that would be involved. 
When a contractor is bidding on a type of boat, substantially similar 
throughout to vessels he has built before, or even substantially simi- 
lar to vessels built by other contractors, whose complete plans and 
drawings are on file where they can be examined, he has something 
to go by. He knows what it has cost him, or approximately what 
it has cost other builders to build such boats before. Or, if he is bid- 
ding on a new type of boat, and has detailed drawings of every part 
with detailed specifications, he can submit those drawings to the 
manufacturers of plates and forgings, etc., and get estimates, at least, 
if not options on the material, and figure up with substantial accuracy 
the amount of labor involved. In this case the contractors had 
nothing on which to base any detailed figures. One contractor tes- 
tified that it was a year's work for 50 draftsmen to make the drawings 
required for the boats built by that company. The builders had 
less than 60 days to prepare their bids; they could not get options, 
nor even definite estimates from the manufacturing companies for 
most of the material, because the manufacturers said : ' ' Send us your 
drawings and we will figure the cost of making the material." The 
drawings could not be furnished, and so it was possible to get options 
on only a very small part of the material. The cost of making 
forgings depended very largely on the shape, character, and design 
of the forging, and without knowing that, no figure could be obtained 
in advance. It was as if a man said to a contractor, "What will you 
ask to build me a house 40 by 25 feet, and two stories high, with brick 
walls and finished inside in various kinds of wood, as I shall specify?" 
The contractor would say, "Show me your detailed plans and specifi- 
cations." Then suppose the owner replied, "I shall work those out 
as we go along." No contractor could make a reasonably accurate 
bid under such circumstances. As a practical matter, what these 
shipbuilders knew about the prices of earlier boats of different 
types was practically all they had to go by, and that was mislead- 
ing. For instance, Mr. Hyde, of the Bath Iron Works, testified he 
knew about how much per ton of displacement larger boats cost, 
and it certainly looked to him as though a thousand dollars a ton 
was enough, and it looked so to anybody; but it was not. 

Mr. Kitchin: Some of these concerns had built such boats ? 

Mr. Dunn. Just one of them, the Columbia Iron Works, had com- 
pleted some torpedo boats, but of very different requirements. 

Mr. Kitchin. And they got people to go over to England and 
France and get plans % 

Mr. Dunn. That was the Bath Iron Works. They went to France 
but they could form no opinion as to the cost from what they got over 
there, because the cost of the wages, on the one hand, and the efficiency 
of the workmen, on the other, was so different that they could get no 
comparisons of cost. 

Mr. Kitchin. One of them testified that although they paid the 
American workman higher, and there was a difference in the experi- 
ence, yet his efficiency counterbalanced the difference in price. 

Mr. Dunn. That may have been eventually discovered, but it 
could be learned only from experience. They couldn't tell in advance 
how the labor cost would compare. 



TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 21 

Mr. Kitchin. And he had worked in the yards. 

Mr. Dunn. There was no testimony- that the relation you spoke of 
between labor cost and efficiency was known to any of the builders 
beforehand. 

Mr. Kitchin. I mean about the labor. 

Mr. Dunn. It was Mr. Hyde who testified himself that he could not 
judge anything from the French prices. 

Now, as to the boats that had been previously completed; that is 
one of the matters of the utmost importance. The only high-speed 
boats that had been, previously completed were boats where the 
Government had said to the builder, "Build a boat of about such a 
size to make such a speed." In some cases there were no specifica- 
tions at all and no instructions. The builder was given the speed and 
he built the boats with that speed, but when the Government got 
them they found two things; first, that the hulls were not strong 
enough to be seaworthy and stand service and they had to strengthen 
them; and, in the second place, there was practically no equipment 
and no adequate provision for either carrying capacity or comfort or 
habitability or convenience, and therefore in these new boats they 
increased all those requirements. 

Now, when you get to delicate problems like this, where every pound 
of weight immensely increases the power you have got to put in to 
get your speed, nobody can tell in advance how much difference 
it is going to make to add thirty or forty tons for the habitability 
and carrying capacity and such things, and the result was that 
those who know the most about previous torpedo boats of different 
types were those who were most misled, in thinking that the price 
allowed under these contracts was a fair price. As a matter of fact, 
they figured on what they knew to be usual about the cost per pound 
of hull and per horsepower of machinery and cost per ton of displace- 
ment — -and that is what the department had done — and these things 
all came out far below the upset price. They talked with the govern- 
ment people who said, "Yes, there is plenty of money allowed 
there," and then they bid as close to the upset prices as they dared. 
Of course they did. They wanted to protect themselves as far as 
they could, and at the same time they wanted to get the contracts. 
Now, Admiral Melville's letter which is before the committee says 
expressly that he did tell Mr. Trigg that these boats could be built 
for less than the estimates, and that that was the general information 
given out at the department. It had always been customary for 
the Navy Department to study these things and work at them, and 
it had always been customary for the builders to come on here and 
talk them over with the department and get their estimates, and 
they had always found those estimates were reliable. So it happened 
here, especially as they knew nothing about it themselves. Those 
who had boats under construction had not gone far enough to get 
accurate information as to cost, and most of the boats were far 
inferior in their requirements to these; so they went to the Navy 
Department and said, "As near as we can calculate, these upset 
prices ought to be large enough; what do you think about it?" 
The Navy Department said, "Yes, there is lots of room there." 

The Chairman. Was it not within the power of these people who 
made these contracts to get this information themselves from the 
French Government; or they might have gotten the English prices? 
Why could they not have gotten the plans from the French Govern- 



22 TOKPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 

ment by sending an agent, a secret-service agent, for instance, over 
there to get them? 

Mr. Dunn. They could have bought them. They had less than 
two months to do it. 

Mr. Myers. They had not time enough. 

Mr. Dunn. They could have bought them for a large sum of 
money, as the Bath Iron Works did. 

The Chairman. Is it not true that the department made every 
extension of time and every concession as to the speed and that every 
concession in every way that was asked by the contractors was granted 
by the Navy Department? 

Mr. Dunn. That is true. 

The Chairman. Then it is not fair, possibly, to say that they did 
not have time to find it out. 

Mr. Dunn. No; I mean to say before making their bids — they 
had no extension of time then; that is what I am talking about. 

Mr. Kitchin. Mr. Hyde was the president of your company, the 
Bath Iron Works? 

Mr. Dunn. Yes. 

Mr. Kitchin. I want to say that he impressed me as being candid 
and fair and honest in his statement, and impressed me as knowing 
as much about this matter as any man, or more than any other man, 
who appeared before our committee. I recall that he said that the 
reason for their loss was that there was a certain combination on 
these materials. 

Mr. Dunn. I would like to read you just what he said. 

Mr. Kitchin. If you will turn to page 56 of these hearings you will 
find the following: 

Mr. Kitchin. Do you think, if there had been open, free, and fair competition 
among steel plants and the material plants, that your company could have built 
these ships within the contract price, or practically within the contract price? 

Mr. Hyde. Yes, sir. 

Mr. Kitchin. Could have built them a great deal cheaper? 

Mr. Hyde. Yes, sir. 

Mr. Kitchin. I meant by the free and open competition, in America here, among 
steel plants and material plants. 

He answers yes. So that his idea then was that the material fel- 
low was the one that dug the shipbuilders. I have always been very 
much impressed with this claim, but I have always seen that they 
had some equity, and I tell }^ou you never have pressed it. I will 
tell you now, it strikes me the only equity you have — I do not know 
how it strikes anybody else, but none of your lawyers or shipbuilders 
have ever pressed it — is this. If Mr. Hyde's testimony be true that 
it was the material fellow that caused the loss, there being no com- 
petition on the material, if Congress went out and made contracts com- 
pelling shipbuilders to buy from these steel men and from American 
manufacturers, knowing that there was a monopoly and a trust, or so 
that they could form a monopoly and a trust, it strikes me that the 
only equity you have got is because you were compelled to buy from 
American manufacturers of material, and the price went up from 62 
cents to $1.68. That is the only equity you have got. 

Mr. Dunn. I think there is force in that; but we have several 
stronger equities than that. 

Mr. Kitchin. If Mr. Hyde's testimony is correct, I do not see it. 



TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 23 

Mr. Dunn. Mr. Hyde himself says, on page 46 of the hearings 
before the Senate committee, that the cost of the material, a 50 per 
cent rise in the cost of material, was a small element in the loss on 
these boats. 

Mr. Kitchin. Let me call your attention to another thing. The 
testimony was, and Mr. Hyde joined in it, that their great loss was 
not so much from the cost of material going up; that they could 
have stood that, perhaps — a little loss — but it was because the 
steel companies had a monopoly and you had to buy from them 
and nobody else, and instead of delivering the stuff in six months 
to eighteen months they kept the shipbuilders three years, and took 
their whole plant that they had to build these boats and kept it idle. 

Mr. Dunn. That was a very large element, but, as I said at the 
beginning, that increase is not in this bill. 

Mr. Kitchin. He says that was the cause of their losses. 

Mr. Dunn. It was the cause of a big loss that is not even figured 
in here. 

Mr. Kitchin. And I suggested to some of them, Why not sue the 
steel companies? Some of them said jocularly, "You had better 
not fool with them. You have got to build boats and you have got 
to buy material from them." 

Mr. Dunn. Most of them had no cause of action against the steel 
companies. To most of them the steel companies said, "We will 
not quote you any price or any date of delivery. That is the most 
difficult material we have ever had to tackle, and when we get it 
all made your government inspectors reject it, and we will not give 
you prices until we get the drawings, and we will not guarantee you 
delivery at any time." 

Mr. Myers. That is a fact, and a very important fact. 

Mr. Dunn. The amount recoverable under actions on contract 
against those steel men would not represent 3 per cent of the losses 
of all these builders. 

Mr. Kitchin. Mr. Hyde, then, did not know what he was talking 
about? He was your vice-president. 

Mr. Dunn. Mr. Hyde himself says that the cost of the material 
was a small item. You just now quoted him to that effect. 

Mr. Kitchin. But does not the testimony show that the losses 
were because of the dela3 r s? 

Mr. Dunn. I want to make that clear. The loss we are asking 
for now does not include those losses by delay. We lost immensely 
in that way, but we have not figured those losses in, although I 
think we ought to have done so. The losses we are talking about 
here are losses besides those. But as to the matter of suing the 
steel companies, my point is that except perhaps in a few instances 
there was no legal cause of action, because the steel companies 
refused to bind themselves to any fixed time. 

The Chairman. Then there will be an extra claim on account of 
delay, since Mr. Kitchin has called attention to it ? 

Mr. Kitchin. I just stated what Mr. Hyde said. There are two 
items here. One is labor and the other is material. That is all 
there is in boat building, and included in that is the general expense. 

Mr. Dunn. Yes. 



24 TOKPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 

Mr. Kitchin. Mr. Hyde certainly explained it is not for labor. 
Turn to page 57. Mr. Hyde says he spent six or seven months in 
visiting these plants. He says as follows: 

Mr. Hyde. I think Monsieur Normand, with whom I associated in France, could 
build a boat such as that in sixteen or eighteen months. 

Mr. McNary. He could build it for how much less in price? Would it cost him 
as much or less? 

Mr. Hyde. His labor per day or per hour is about 50 per cent of what ours is, and 
material about the same ratio. That is largely made up for by the fact that our labor 
is much more productive than theirs. 

Mr. McNary. You think the labor is more productive? 

Mr. Hyde. Yes, sir; I know it is. I spent several months in his plant, and I know it. 

Then he went on to speak of the material delivered, duty paid. 
He was offered from German steel plants this forged steel at 62 cents, 
duty paid, in New York; and yet the steel trust made them pay 
$1.68 at their plant. 

Mr. Tirrell. In other words, without any duty at all, the* differ- 
ence in capacity of the laborers in our country would have made up 
the difference in the cost; a most absurd proposition. 

The Chairman. The members of the committee will argue this out 
afterwards. We want to have the hearing now. 

Mr. Dunn. The questions just asked as to where the trouble was, 
whether in the materials or the labor or somewhere else, indicate the 
assumption that the cause of the loss is an excessive cost, which we 
have to explain. Now, as I hope to show you later, there were some 
elements of excessive cost in the construction of these boats, and for 
the largest of those elements, namely, the delay in construction and 
the cost of trials, the Government was to a large extent directly 
responsible; but if all of those elements of excessive cost had been 
eliminated, the builders would still have had a very heavy loss. The 
principal cause of their loss, as I have been trying to explain, was not 
excessive cost at all, but utterly inadequate bids, and the compen- 
sation asked for in the pending bill would no more than cover the 
normal, ordinary cost of such boats as these were when finally com- 
pleted, if they had been built under the conditions prevailing when 
the contracts were let, without any rise in the price of materials and 
labor, and with the designs, drawings, and calculations all correctly 
worked out. The principal trouble was that, when they came to 
work out the drawings, designs, and calculations, and the miscella- 
neous requirements for equipment, carrying capacity, convenience, 
comfort, and habit ability, the effect of all these requirements, com- 
bined with the speed and strength requirements, was to present a 
problem much more difficult than was presented hj any boats pre- 
viously constructed, and boats answering all those requirements could 
not possibly be built here or elsewhere in 1898 or at any other time 
for any such price as the department allowed or the contracts called 
for. 

Our first and largest equity, therefore, is that in many particulars 
the Government did not tell us when we made our bids what the 
requirements would be, and in the few particulars in which the 
specifications were definite, such as horsepower and displacement, 
they- proved to be erroneous ; that we had no data on which we could 
prepare any accurate estimates or obtain accurate estimates from 
material men; that the Government had undertaken to calculate the 
cost, and at least knew better than we what requirements it had in 
mind in all the particulars in which the specifications were indefinite; 



TORPEDO BOATS AND TOKPEDO-BOAT DESTROYERS. 25 

that the goYernment officials undertook to assure the contractors, as a 
result of their study of the subject and the calculations they had 
made, that the upset prices left plenty of margin; and that as a 
practical matter the bidders had to rely on those assurances and the 
government estimates (having found such estimates reliable in the 
past), because there was nothing else they could rely on. In a word, 
the Navy Department, being itself mistaken, honestly but neverthe- 
less disastrously misled the contractors, and its miscalculations were 
chiefly responsible for the wholly inadequate bids. 

Having induced a lot of contractors, many of them with no pre- 
vious experience in government work, and none of them with any 
experience sufficient to aid them materially on this problem, to bid 
such inadequate prices, there were only two things the Government 
could fairly and honorably do. One was to exercise their power of 
direction and supervision in such a way as to permit the construction 
of boats that could be built for prices somewhere near the contract 
prices, which would have meant less satisfactory and efficient vessels 
than these were when finally completed. 

But the department did not chose to adopt that course. Instead it 
exacted the very highest excellence that the latest development of 
the art could furnish in all the materials of the boats; and in practi- 
cally every one of the hundreds of details left to the discretion of the 
government inspectors, exercised that discretion in the most exacting 
fashion; and, having discovered its miscalculations as to displace- 
ment and horsepower, called upon the builders to correct its errors 
at their own expense, with only a slight modification of the speed 
requirements made necessary to permit the other requirements to be 
fulfilled, with the result that first-class boats were built, but at a cost 
necessarily way above the contract prices. Under those circum- 
stances, the fair and honorable thing for the Government to do is, in 
our opinion, to pay the builders what the work as finally done was 
f airlv worth. 

Now, may I answer the question of the chairman as to just what 
the Government did to increase the cost of these boats? 

The Chairman. Certainly. 

Mr. Dunn. In the first place, the Government made its calculations 
in .advance. It was studying this subject. It had studied the sub- 
ject more than any of these builders. It made these calculations in 
advance on the displacement of the boats and the speed to be attained, 
and it absolutely limited the builders to a certain displacement. 
When they came to work it out they found that neither the original 
speed requirements nor the slightly modified speed requirements could 
be met, in connection with the other requirements as to strength and 
carrying capacity, equipment, comfort, convenience, and habita- 
bility, without largely exceeding both the original limits of displace- 
ment and the original calculations for horsepower of engines. This 
meant a large amount of additional expensive material, which the 
builders had to furnish and pay for; new and improved designs for 
the engines, involving the doing of a great deal of work twice; long 
delay while the problem was being worked out, and a great many 
expensive trials. That miscalculation is one of the things the Gov- 
ernment did that increased the cost. 

The Chairman. The Government of the United States has received 
the benefit from these people, but the Government, on the other hand, 
has done everything possible and not held them to their contract at 



26 TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 

fih^ K &U n d them conces sions of time and concessions of sneed 
LSttSr* ^ ^^ 6Very reqU6St ^at nL SP be e en 

dJSaSr^SS r g P ^ n of W tLTone aking n0W " and ^ 
Mr • Kitohin The Bath Iron Works have been making these tor 

Save th°ey noU t0rped °- boat *"***» *» the GovXtnHinTe, 

Mr. Dunn. They have some of the new lot 
Mr. Kitchin. And some of those other companies also? 
Mr. Dunn. The only other one is the Fore River Company 
Mr Kitchin lou said they were paying a great deaHiio-her nrice 
now for these bigger boats they are building thin they did then ? Do 
you not reckon they are going to get some of their loss back on the 
profits on these boats, on these prices* 

U.^' J?. UN m Tha ^ couldn,t b e said of any but those two. But I 
think the Navy Department can be trusted to take care of itself 
there. The builders hope, of course, to make a reasonable profit but 
they may repeat their past experience before they are through ' 

doubt SoTit.' l ^^ ^ made a g ° 0d C ° nLct - Th - - - 
a gt ernment ItZZt ^ & — *° "^ mU ° h T 0ut of 

De^rtment?^ Y ° U ^^ & C ° ntraCt f ° r building for the Nav ^ 
Mr. Dunn. No; for half a dozen other departments. 

&£'MA?T*\ BaW WOuld the Fore River En gme Company live if 
they did not get government contracts? 

Mr. Dunn. That is what their business is adapted for. 
o'clock 12 ' 30 v°' Cl0Ck P ' m - the commi ttee took a recess until 3.30 



AFTERNOON SESSION. 



Committee on Claims, 
House of Representatives, 

Tuesday, January 19, 'l909. 

mSS S ed at 3 - 30 ° ,clock p m " Hon - Ws M - 

ARGUMENT OF HENRY W. DUNN, ESQ., OF BOSTON, MASS.— Con- 

tinued. 

Mr. Dunn I want to make a very careful statement, which I will 
make as brief as I can, of exactly the conditions under which these 
contracts were let. I shall have to go into two or three phases of 
it, all or which are of vital importance, 

In the first place the experience with previous torpedo boats, 
lorpedo boats had been chiefly developed in France, and torpedo- 
boat destroyers chiefly m England. As stated in the report of Messrs 
Lannard and Chandler, who were sent around to investigate these 
boats for the department, the building of torpedo boats of the highest 
practicable speed was an art requiring special skill and long experi- 
ence and there were comparatively few successful builders of tor- 
pedo boats in the world; and, as they go on to say, the attempt was 



TORPZDO BOATS AND TOEPEDO-BOAT DESTROYERS. 27 

made in this country to rival the best results of foreign builders by 
manufacturers here who had practically no experience, and on de- 
signs prepared only in outline by the department, and not worked 
out in detail. Now, that statement requires some explanation of 
the difference between these boats and the so-called torpedo boats 
of which, as it already appears in the papers and tables here, quite 
a number had been built before. 

The peculiarity, of course, of a torpedo boat is its small size and 
its speed, and up to a certain limit it maintains a reasonable propor- 
tion to other kinds of construction. That is to say, you take a large 
steam yacht and a small steam yacht, and the small steam yacht will 
cost more per ton of displacement, but not necessarily enormously 
more. The tendency of course is the larger the vessel the higher the 
speed which it can develop with comparative ease. As you go down, 
making your vessel smaller and smaller and still keeping up your 
speed, there is a certain point up to which you can do it with a certain 
difficulty. When you try to drive beyond that point, of course there 
is a limit that you can not possibly pass— that has not been passed 
yet. With anything of that kind the nearer you get to the absolute 
limit of speed for a vessel of that size, the more enormously you 
increase }^our expense. Finally } 7 ou get to the point where } T ou 
have got to have the most expensive materials. You have got to 
have the proper strength, and at the same time the greatest possible 
lightness. You have got to have everything designed with the 
utmost care; you have got to have your engines perfectly balanced so 
as not to cause excessive vibration of your hull; you have got to 
have your hull strengthened in a particular manner peculiar to that 
type of boat and only known by experience; and the problem 
becomes one of the utmost nicety in balancing those conditions. 

In the boats that had been built up to the time these contracts were 
let, they had not reached that point of extreme difficulty except in 
certain ones that I will speak of. There had been small boats of 18 
and 20 and perhaps more knots per hour speed, as compared with the 
26 and 28 knots that were specified here, but matters had not been 
pushed quite to the point where extreme skill and nicety were required 
to obtain the speed. There were three torpedo boats which had been 
previously completed by one of the builders that bid for one of these, 
the Columbian Iron Works, who had built the Foote, the Rodger s, and 
the Winslow, which were 24 and 25 knots. Twenty-four and 25 knots 
was a less speed than was required by these contracts. There had also 
been built by another contractor the Porter and the Dupont, which had 
a speed comparable with these vessels. But in the working out of 
their contracts on these earlier boats, the builders had been left 
simply to get the contract speed on a boat of a certain size and the 
details had been left to them. The result was, of course, that they 
left out everything that would make for weight and did not help in 
speed so far as they possibly could. Speed was practically the only 
requirement of the contracts. The result was that when the Porter 
and the Dupont were finished and came to have their trials and go into 
service, they were found to be radically deficient in structural strength. 
I do not mean that they broke in two when they first went across the 
harbor, but the department found them extremely unsatisfactory, and 
changes in the direction of strengthening were made, and the lesson 
was remembered in superintending the building of these particular 
boats. 



28 TOKPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 

In the Foote, the Rodgers, and the Winslow the trouble was notTso 
much deficient strength as that they had left out everything, almost, 
in the way of equipment and carrying capacity for coal and provisions, 
and arrangements for the comfort and convenience of the officers and 
crew. It is pretty hard work to get satisfactory crews for these boats 
anyway, they have to live in such narrow, cramped quarters. All 
the provisions for convenience, equipment, carrying capacity, habit- 
ability, had been neglected and pushed aside by the builders in order to 
get their contract speed. 

With those lessons before them, the department in preparing the 
specifications for these boats expressly required a lot of things as to 
carrying capacity, equipment, convenience, comfort, and habita- 
bility which put these boats not only away ahead of the existing 
boats of this Government but ahead of the foreign boats. The same 
trouble was being found at the same time with the foreign boats. 
They found that the boats could make a dash on a trial trip, but they 
were not serviceable boats in service; they were not well enough 
equipped and not strong enough and did not have enough carcying 
capacity. Those same difficulties were found in foreign countries. 
So all those requirements in these boats were immensely increased. 
Now, the effect of that was to add tons to the weight in the boats 
without advancing in anyway their strength of hull or speed; and 
when you had to drive all that extra dead weight at a higher speed 
than was required under the earlier contracts and make your hull 
sufficiently strong and get your engine sufficiently powerful, you 
reached that point where this problem became the one of extreme 
nicety that I have spoken of, that only the most thorough skill and 
repeated experimenting could possibly work out — something that 
could not be fully appreciated by the builders or the department at 
the time these contracts were let. There were boats building at the 
time these contracts were let, but they were not far enough along to 
furnish experience of value. There were four vessels, the Farragut, 
the Stringham, the Goldsborough, and the Bailey, about halfway 
between the torpedo boats and the torpedo-boat destroyers, which 
were to be 30-knot boats. They had been started before the lessons 
of the Foote, the Rodgers, the Winslow, the Porter, and the Dwpont had 
been learned, and the}' also were inadequate in their fittings and 
equipment and carrying capacity, and so forth, and the builders were 
left more or less free to work out the result of speed in any way they 
could. Nevertheless, those boats when they were finally completed, 
which was after these contracts were let, emphasized very strongly 
the lessons which had already been learned by the department in the 
Porter and Dwpont and the Foote, Rodgers, and Winsloio. 

These four 30-knct beats which were building in 1898 shewed 
entirely different results from the brats covered by this bill. The 
Farragut had great difficulty in fulfilling her contract requirements. 
She finally succeeded in making the required speed, but this was 
accompanied by excessive vibration, and the hull was so light as to 
be criticised by the department officials for insufficient strength. 
The Stringham, Goldsborough, and Bailey were even less successful. 
The Goldsborough repeatedly failed to make her speed, and her build- 
ers finally became invclved in financial difficulties so that the Govern- 
ment was compelled to annul the contract and take over the b;,at 



TOKPEDO BOATS AND TOEPEDO-BOAT DESTROYEES. 29 

for completion. The StringJiam never succeeded in making the 
required speed, and in 1905 had not yet been accepted. The Bailey 
was completed and accepted, but her speed had been accomplished 
at such a sacrifice of strength as to necessitate extensive alterations 
by the Government after a short experience in service. These changes 
undoubtedly resulted in reducing her speed considerably below 30 
knots. 

Those lessons which had already been learned from the fast beats 
built befcre 1898 were subsequently emphasized by the fcur beats 
then under construction, the Farragut, Goldsborougli, Stringliam, 
and Bailey, and that was the reason why the department put in these 
additional requirements, bcth as to strength and as to carrying capac- 
ity, cenvenience, and habitability, and all the rest of it. Now, to 
calculate exactly how much difficulty that would add to the problem 
of securing sufficient strength and sufficient speed was a matter of a 
great deal of difficulty. The department attempted to make such a 
calculation and it fixed on a displacement which it thought — that is, 
a total weight of vessel — which it thought would be sufficient for 
the strength required, and the horsepower of engine which it thought 
would be sufficient for the power required. The general length of 
the vessel and its general dimensions were defined, and some mis- 
cellaneous requirements for the equipment and carrying capacity, 
and so forth. Those and the displacement and the horsepower 
were the data furnished 

The Chairman. Were not these proper matters for consideration 
prior to entering into the contracts ? 

Mr. Dunn. I am coming to that in exactly that aspect, if the chair- 
man pleases. Those things were the data given to these people to 
bid on. The Government had attempted to study out those prob- 
lems in advance. No boats had been built in this country which 
would solve those problems; no boats had been built abroad which 
had comparable provisions in the matters of serviceability, carrying 
capacity, and so forth. These boats were a distinct advance on any 
foreign boats as well as on any American boats in these respects; and 
how far, as I say, that would affect the speed and strength problems 
was an abstract question of calculation. The Navy Department 
made these calculations and fixed on the horsepower of the engines, 
and the displacement, and the speed of the vessels, and those things 
were specified in the contract, and the bidders were not to bid on any- 
thing above the fixed displacement. Those things were offered to 
the contractors to bid on. The Columbian Iron W orks had built the 
McKee, a low-speed boat, and the Foote, Rodgers, and Winslow, which 
differed from all these vessels in the respects I have enumerated. In 
those vessels the extra weight had been cut out. This added so enor- 
mously to the difficulty of the shipbuilder that their very experience 
with those boats was what most of all misled the Columbian Iron 
Works in making their bid. They said, "The upset price here will 
allow us a great deal more per ton than we got on the Foote, the 
Rodgers, and the Winslow. That must be enough to make up for 
the difference." It was a case of miscalculation on a problem that 
nobody had ever worked out by experience. They said, "The depart- 
ment has calculated these things, and we have always found the 
department perfectly reliable heretofore, and we have no estimates 



30 TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 

of our own on which we can proceed." It was freely stated about 
the department that they had figured these things out, and that the 
estimates were plenty large enough. 

The Chairman. Do you mean to say that shipbuilders in making 
contracts with the Government rely on information given to them 
by the Navy Department? 

Mr. Dunn. That is precisely what they do. 

The Chairman. And not on their own experience in building ves- 
sels of that character? 

Mr. Dunn. Before the chairman came in I had stated with some 
detail that the peculiarity of this type of vessel is such that experience 
in building other vessels — any other vessels that had been completed 
before these contracts were let — does not enable you to make any 
accurate calculation as to its cost; but the department thought they 
could calculate it. 

The Chairman. Would not this argument apply to every contract 
that is entered into by the Navy Department on the part of the 
Government for the construction of vessels of any kind? 

Mr. Dunn. It certainty would not, Mr. Chairman. 

The Chairman. If the contractor relies entirely upon the repre- 
sentations made to him by the Navy Department and has no other 
information about any other? Supposing a new company is organ- 
ized and commences for the first time the construction of ships and 
goes to the Navy Department for information and gets all the infor- 
mation available there, gets all the light it can, and then in construct- 
ing the vessel they have a loss, and then they come in here and claim 
that they have had no experience in shipbuilding, and, as they have 
relied upon the representations of the Government, they ought to be 
reimbursed for their loss. 

Mr. DuNxNT. No, Mr. Chairman, the point is here; there was no 
other possible way by which they could have determined the question. 
I put a question to a member of the committee in conversation that I 
would like to put here. Suppose I am going to build myself a house 
and that it is about the time when concrete construction first came in, 
and I am an expert engineer, a graduate of a technology school, and 
all that sort of thing and more or less an expert on all building mat- 
ters, and I look into this new concrete proposition and then I send 
for some builders, some of whom have built a certain kind — the pre- 
vailing kind — of concrete houses, and others of whom have not built 
any, and I say, "Now, I want a concrete house built and I want to 
improve on anything that has ever been built before. I have some 
new ideas as to the way of making the concrete and the way of putting 
the thing together and the degree of thickness of walls, and strength 
of construction, and so forth, that I am going to work out. I have 
not drawn my plans in detail. All I know is the height and the 
breadth of the house and the thickness of the walls and the general 
location of the rooms and the total amount of concrete I want to have 
used. I will work those things out as I go along. I shall want you 
to submit drawings and I will pass upon them. But now I want you 
to make bids upon it. I want you to bid on that house, and I have 
set an upset price of $10,000 for it." These contractors look into 
the figures on previous concrete houses and they find that previous 
concrete houses have been. built for $7,000. They say " There is no 
experience by which anybody can tell what these differences that this 
gentlemen proposes to make will amount to, but it certainly looks 



TORPEDO BOATS AND TOEPEDO-BOAT DESTROYERS. 31 

as though $3,000 would be enough margin, and he has studied into 
it; he is a man who has worked out these ideas, and he says $10,000 
will do it;" and so they put in bids of something less than $10,000. 

Now, when they go ahead to build for the first time in the world 
exactly such a concrete house as I have in mind, certain of my 
new requirements adding enormously to its cost, we find out that, 
when for the first time such a house as that is built, it necessarily 
costs, and would cost anybody, $20,000 instead of $10,000. Then 
the builder comes around to me and says: " Neither you nor I could 
tell beforehand what this would cost, but you had studied the ques- 
tion for a long time. I only had a few days to figure on it and you 
said $10,000 would do it. I contracted to build that house for 
$10,000 and I have done it, and if you want to insist upon it, I have 
no legal remedy, and that is all there is to it; if you feel it just that 
you should in fact get a $20,000 house, half of it at my expense, 
when I have conscientiously gone on and met every requirement 
that you imposed and built you a house that is worth $20,000 
and you can sell for that— if you think it is just, then give me no 
more." Now, it seems to me that as a fair-minded man there is 
only one thing that I could say. I should say: "My calculations 
have been erroneous. It turns out that that could not be done at 
the price I thought it could. There was no way for you to know 
an} r better at the time. It was much better for me that you should 
be willing to undertake it than to lie back and say: 'I do not 
know; possibly you may be wrong, and I will not touch it;' and 
now that you have gone ahead and conscientiously built me a house 
that necessarily cost $20,000, I am going to pay you $20,000." 

That is exactly the proposition which, in this particular, these 
boats presented. 

Now, to go a step further, that is not the whole of the proposition. 
You know the Government prepares these contracts in a certain form 
and one has to sign them if he wants to do business at all. The 
Government has always provided that a great many things in their 
specifications shall be "as directed," or shall be " as the superintending 
naval constructor may require." I ran rapidly through the specifi- 
cations for one of these boats. In the hull alone, to say nothing of the 
equipment and the machineiy, I find 127 places where it said that 
something "shall be as directed," or some similar provision. It pro- 
vided for a certain thickness of the plates in the hull, but it said, "but 
heavier material shall be used when directed." It provided for 
frames. Then it said, "Extra frames shall be put in where greater 
structural strength is required, as directed." 

The Chairman. You were allowed extra for all of these? 

Mr. Dunn. Not for one of them. That is a vital mistake that has 
been made in these hearings. The specifications state that some- 
thing shall be so and so, "as directed," and additional requirements 
were imposed under those provisions, and not a cent has been allowed 
for any of them. As they went on, all the time these boats were 
building, the Navy Department and the naval constructors were 
studying the business of torpedo boat building. While these boats 
were under construction, the Farragut, Stringham, Goldsborough, 
and Bailey were completed and were largely unsuccessful boats. 

The Chairman. Before you get through I want you to specify any 
extras that any of these companies put in by reason of this condition 
of the contract which have not been paid for. 



32 TORPEDO BOATS AND TOKPEDO-BOAT DESTROYERS. 

Mr. Dunn. They were not extras, Mr. Chairman. As I say, the 
specifications provided that the plates in the hull should be of a cer- 
tain thickness unless heavier plates were required. In a great many 
cases the inspectors ultimately required that they should be thicker. 

Mr. Hawley. Did they put that requirement in all contracts for 
vessels for the navy ? 

Mr. Dunn. Similar provisions had been put in all naval contracts. 
There was nothing in it that caused particular alarm when it was put 
in. In dealing with classes of vessels they were familiar with, with 
battle ships and cruisers, the builders who bid on them know from past 
experience approximately what will be necessary and approximately 
what the Government will require. Here they were starting out 
between them to build a kind of boat, and to fulfill requirements such 
as never had been made in any boat anywhere. 

The Chairman. You do not mean to claim for your company, or for 
any of these companies, that they were in any way misled by mis- 
representations made to them by any of the officers of the Govern- 
ment ? 

Mr. Dunn. They were unquestionably misled by misrepresenta- 
tions made in good faith. 

Mr. Waldo. You do not mean exactly " misrepresentations ? " 

Mr. Dunn. By erroneous estimates and calculations. 

Mr. Hackett. There was good faith in this on both sides, but they 
were both mistaken. 

Mr. Dunn. I am very sorry the chairman was not here when I 
began. As I said then, when you push the speed of these small ves- 
sels and the load they must carry beyond a certain point, of course 
there is a limit that you can not pass, and as you approach that 
limit nearer and nearer the expense of material and design and con- 
struction and labor become enormously increased. They pushed the 
thing almost beyond the limit of possibility here — not quite — in the 
requirement of speed, combined with all the dead weight of equip- 
ment, and various provisions for other purposes, together with the 
structural strength that they required in the boats. They carried 
those things further than they had ever been carried in this country 
or in any foreign country, and nobody knew how much it was going 
to cost or even by what designs it was going to be accomplished. As 
a matter of fact, although, as I say, the department had estimated 
for a certain displacement, there was not one of these boats but what 
had tons and tons of material in it over the amount originally esti- 
mated by the department. These builders said when they bid : "We 
are limited to a displacement of so much, and we shall therefore have 
so many tons of material to pay for," and they figured as well as 
they could on that basis. "Our engines are to be of a certain horse- 
power," and they figured the horsepower of the engines. As a matter 
of fact, as the vessels neared completion the government inspectors 
said: "This is not strong enough. You must put in more plates 
there, as the specifications say we may require you to do. You must 
put in braces here, additional frames there. You must change this 
design here and there and somewhere else;" with the result that they 
required many tons of material to be put in over and above the 
original limit that they had placed on the total weight of the vessels. 
Then the result was that the horsepower that they had originally 
provided for would not drive that vessel at the speed of the contract, 



TOEPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 33 

and they said: "Well, you contracted to get that speed; you have to 
increase your horsepower." So they had to increase the horsepower 
of the engines from the original contemplation, and at the same time 
they put in so much weight at other places that they had to actually 
decrease the weight of the engines while they were increasing the 
horsepower. 

None of those things had been figured out in detail beforehand. 
The drawings had not been made. Nobody had decided how those 
engines should be constructed. They said, "You builders make the 
drawings as the work goes on and submit them to us. 7 ' One builder 
made 886 detailed drawings and submitted them to the Government 
and they accepted some and rejected some and kept some a year 
before they decided on them. They decided how they would build 
those boats as they went along, and they ultimately put into them a 
great deal more material, considerably higher horsepower of engines, 
and a great deal more strength of structural material than they had 
contemplated in the beginning. The department had estimated on 
this new problem, what it should be done for, in what time it should 
be completed, what weight of vessel would be necessary, and what 
horsepower of engines, and everyone of those calculations proved to 
be misleading. The builders relied on them; there was nothing any- 
where that they could get that was any better. It was a matter that 
one had simply to calculate on, and the department had had more 
time to calculate on it than they had. Nobody could have estimated 
accurately on it without preparing actual designs and detailed draw- 
ings and testing them by experience. Nobody could tell how much 
it would cost to build an engine of the extreme lightness required here 
and of a certain horsepower unless he had detailed drawings to figure 
on. They had to work out every part of that engine and then look 
at those completed drawings and see how heavy the engine would be, 
how many forgings would have to go in it, and the character of the 
forgings. That had not been done. Even if it had, there probably 
would have been a miscalculation as to the power that engine would 
develop after it was built. But they had not even worked out the 
plans. They said, "We have estimated from what we know of other 
boats what speed you could get with an engine of this weight and 
horsepower; that you can get the soeed and the other requirements 
with a certain weight of hull" — a smaller weight of hull for the di- 
mensions of the boat than had ever been made before. Now the 
delays, that proved so expensive, were caused very largely by the 
department's delay over the consideration of drawings; and then 
further delay and an excessive number of expensive trials were caused 
by the experiments necessary to discover the miscalculations and work 
out the remedies. 

The Chairman. Has there never been any complaint made to the 
Navy Department at the time of the completion of these contracts? 

Mr. Dunn. Time and again. 

The Chairman. The facts are that the t°stimony in tMs case shows 
conclusively that every concession asked for by these companies was 
granted, both as to speed and as to time. 

Mr. Dunn. Mr. Chairman, the Navy Department made three cal- 
culations, as to the time, as to the cost, and as to the possible speed. 
There was not a single reason why they should yield the speed and 
yield the time that is not equally a reason why they should yield 

72536— t b d— 09 3 



34 TOEPEDO BOATS AND TOKPEDO-BOAT DESTROYERS. 

the cost. The fact is that the department has admitted its error on 
all three of them. Two of them were within its power to deal with. 
It says: "We find we have miscalculated the speed you could reason- 
ably expect to get with all the other requirements of these vessels. 
We find we have miscalculated the time, and we find that we have 
miscalculated on the cost at which they could actually be built. Now, 
it is within our power to correct our miscalculation as to the time by 
extending your time. It is within our power to correct our miscal- 
culation as to the speed you could get without sacrificing strength 
and other requirements, and we will do that. It is not within our 

Eower to correct our miscalculation as to the lowest cost at which such 
oats can possibly be built, but we admit our error, and we recom- 
mend to Congress that they correct it.' 7 

The Chairman. In other words, they make a contract with you, 
and six or seven years afterwards, after you come in and report that 
you are suffering some losses, they come up here with you and ask us 
to reform the contract, and ask us to assume that neither of you were 
capable 6f making a contract. 

Mr. Dunn. Exactly, for this new type of boat. 

The Chairman. Let me suggest this, for the purpose of showing 
you the difficulty we are laboring under. Here are the Cramps, large 
^Pennsylvania shipbuilders, who have had experience in building ves- 
sels, and in the Court of Claims one of their suits was for $500,000. 
They got $125,000, went to the Supreme Court, and the Supreme Court 
reversed the case and sent it back to the Court of Claims. They held 
in construing the contract the parties were bound by their contract. 
Now, they are here asking us to send the same case back to the Court 
of Claims with instructions to the Court of Claims to find that the 
contract did not mean what it said. You, in effect, are asking us to 
do the same thing. 

Mr. Dunn. Not at all; we admit at once that under the contract 
we have no legal claim. We do not rely on any question of construc- 
tion of the contract. 

Mr. Waldo. You are asking us to reform the contract. 

The Chairman. Or asking us to say in this case that neither of you 
knew what you were doing when you entered into the contract. 

Mr. Dunn. We could not possibly have known. That is exactly 
what we are saying. We say, so far as it is a question of precedent, 
that no case can ever arise like this until the Government goes into 
the construction of another kind of vessel, which is an experiment, 
which has got to be worked out as they go along, and that case ought 
to be dealt with the same way if the same errors are made. The only 
really fair way to make contracts for work of such an experimental 
character would be on the basis of actual cost under government super- 
vision, plus a percentage or a fixed sum for the contractor's compen- 
sation. That method is used in many commercial contracts of differ- 
ent kinds. When the problem is a new one and no one can tell what it 
is going to cost, that is the only way to work out justice to both sides 
under the terms of the contract. That wasn't done here, and now 
both parties to the contract come to you to make a fair and just 
i settlement. 

The Chairman. We are now seriously contemplating building air 
ships. If we establish a precedent of this kind here may we not be 
involved in a lot of trouble with air ships ? 



TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 35 

Mr. Dunn. I say, when the first air ship is built, if the company 
contracts with the Government, and if, with the best judgment they 
can use, they are in a situation of this kind, and the Government does 
not pay the contractor what it costs him, it ought to be ashamed of 
itself. I say that when they built the first vessels for the new navy 
they had a similar difficulty ; they had no experience to go on in this 
country to guide them, and therefore they utterly miscalculated the 
cost, and John Roach was ruined. The Government ought to be 
ashamed of itself to say "We got you into this thing through your 
innocence and ignorance. Now, thank Heaven, the loss is on you. 
We have vessels that are worth millions more than we paid for them." 

The Chairman. Where are those vessels now? 

Mr. Dunn. In service. There is plenty in the evidence to show 
that they have proved eminently satisfactory in service. Several of 
them made a voyage to the Philippines. 

The Chairman. Do you mean on that trip around the Horn? 

Mr. Dunn. No, they went through the Mediterranean and through 
the canal, I think. 

The Chairman. Did not some of the torpedo boats go with the 
fleet around the world? 

Mr. Dunn, Yes; I think they did. 

The Chairman. Let me make this suggestion: Can you not dic- 
tate what you have to say to the stenographer just as well when we 
are not here? We will read everything you will say, but we must 
go to the House now. There is a roll call on the urgent deficiency 
bill, and we must be there to vote on it. 

Mr. Dunn. I assisted Mr. Bowles, Mr. Myers, and Mr. Wilson in 
the preparation of this statement here. To my mind there is not a 
word in it that is not essential to the understanding of this case; 
there is not a word in it that is not absolute matter of fact; and there 
is hardly anything that I could add to it or improve on it now. If I 
were to go back and prepare a brief to submit to this committee, it 
would be nothing in the world but a reprint of this statement, which, 
together with these gentlemen, I spent weeks on in studying at the 
time it was being prepared. 

Mr. Hackett. May I ask you this, if there is any special question 
that any member of the committee wants to ask, ask it now and Mr. 
Dunn will meet it. 

Mr. Dunn. I am coming to that. I want to say one word more 
about this. This is a serious matter to these people. It has put 
nearly all of them into bankruptcy. We do not ask Congress, of 
course, to act on that account alcne. It is also a serious matter on 
the part of the nation. We are absolutely satisfied that any fair- 
minded man, such as the members of this committee, who will go 
into the thing far enough will be convinced of the justice of it. I 
want to urge the committee, and every member of it, not to decide 
against this thing until he has carefully read that statement. I 
would like to submit this "Statement of the builders" as a part of 
my argument here and have it made a committee document. I am 
convinced that there is only one answer to it, when it has been care- 
fully read and studied, and if there is anything in it, after it has been 
read and studied, any facts stated in it that the committee has any 
doubt about, we are prepared to produce ample evidence of every 
such fact. It is the result of careful investigation, careful reading 



36 TOEPEDO BOATS AND TOEPEDO-BOAT DESTKOYEBS. 

and study cf the evidence, and I have net any question that every- 
thing it says is so, and that when everything it says has been fully 
grasped the situati n will appear just as 1 have put it here, a situati n 
where the miscalculati ns ^.f the Navy department in every particu- 
lar misled these people. They built the best torpedo b ats and. 
t rped -b at destr . vers that had ever been built anywhere. They 
are asking y u t pay a price f r them much less than they c st 
and less than they wculd have est anywhere else in the w rid. 
They are asking n w simply t be paid what the b.ats are w< rth, a 
value which they have fully represented to the Government every 
since; and whenever a similar situati' n arises I believe that the 
United States Government < right t be large enough and fair en. ugh 
and upright en ugh t meet it in the same way. It is «n t even what 
they ( right fairly to have c st, because that wculd have included a 
pr lit and als an allowance f r the increased general expense f r 
delay, neither cf which is included. IS either is the excessive number 
cf trials required by the department's wr ng calculations included in 
the ] amsey B ard's figures. Ihe actual Lsses amount t ab ut 
$3,000,000; the i amsay B ard figures are nearly $1,000,000 less 
than that, and they are unquesti nably below the fair value cf the 
b ats. 

The Chairman. I do not think there is any disposition on the 
part of the committee to hurry up matters in this case. I want to 
read everything there is in it, and I am going to ask to have this 
record sent down to the printer and printed. There was some talk 
about taking a vote upon this matter this week. Personally I am 
not prepared to vote on it and do not intend to until I am satisfied, 
either that you ought to recover or ought not to. 

Mr. Dunn. There is one point that I have not spoken of that I 
think is very important. I w ant to distinguish between two things. 
I wish Mr. Kitchin was here. So far as conditions prevailed in this 
country, at the time these contracts were let, which necessarily 
required that materials should cost more than they cost abroad, 
that is, of course, one of the elements that entered into the miscalcu- 
lation:. So far as there was, through the general prosperity of the 
country, a rise in the price of materials and labor wdrile this w^ork 
w T as going on, that was unquestionably something of which the 
contractors took their chance. The rise in the cost of materials and 
labor, while this work was going on, represents only a small part of 
the loss, and is fully covered in the excess of the actual loss over the 
Ramsay Board's figures. To ask nothing more than the fair cost of 
building such boats, if the department and the builders had known 
what they were about, at the prices and under the conditions pre- 
vailing; at the time the contract was let, or at any time before or 
since in this country. 

I v ill submit a brief summary of our contentions to be added to 
my argument. But the "statement of the builders contains a much 
more adequate presentation of the case. 

STATEMENT OF CLARENCE W. BE KNIGHT, ESQ., OF WASHING- 
TON, D. C. 

Mr. De Knight. Mr. Chairman and gentlemen of the committee, 
inasmuch as the hour for adjournment has arrived, I will not detain 
the committee further than to submit a copy of the " statement of 



TOKPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 37 

the builders of torpedo boats and torpedo-boat destroyers/' to this 
committee in the Fifty-eighth Congress, a very carefully prepared 
document, which I understand is to be printed as part of this hearing. 
(See Appendix, p. — .) 

(Thereupon at 12 o'clock m., the committee adjourned until 
Thursday, January 21, 1909, at 10.30 o'clock.) 



SUMMARY OF THE CLAIMS OF THE BUILDERS, SUBMITTED BY MR. DUNN 

AFTER HIS ARGUMENT. 

In considering the causes of the heavy loss suffered by all the con- 
tractors, the first question is, whether this loss resulted from inade- 
quate contract prices or from excessive cost. Exactly what is meant 
by this distinction may be explained as follows: If the actual cost 
of these vessels was a fair, normal, necessary cost under the conditions 
which prevailed at the time the contracts were made, then it would 
follow as a necessary conclusion that the contract prices were inade- 
quate and all the loss would be chargeable to that cause. If the con- 
tract prices represented the fair, normal, necessary cost of the vessels 
under the then prevailing conditions, all the loss would be chargeable 
to excessive cost. (Reference is made to the conditions prevailing 
when the contracts were made, because if the cost of labor or materials 
was increased by an unexpected change in conditions in the country 
at large it could fairly be said that the builders took the risk of any 
such change in conditions.) 

Using the words in the sense above explained, the loss in this case 
was, in fact, chiefly due to inadequate piices, and in smaller part to 
some items of excessive cost. In other words, the fair, normal, neces- 
sary cost of the vessels under the conditions prevailing when the con- 
tracts were made would have been far above the contract prices, and 
at least equal to the fair average prices fixed by the Ramsay Board, 
but not as high as the actual costs reported by the builders. 

So far as the loss resulted from inadequate prices (in the sense above 
defined), the Government can make good the loss without paying 
any more for the vessels than they are fairly worth and ought reason- 
ably to have cost. Whether the Government ought to do so depends, 
however, on the causes which resulted in the fixing of such inadequate 
prices. So far as the loss resulted from excessive cost, any equitable 
claim against the Government must proceed on the ground that the 
Government was directly responsible for such excessive cost. 

To answer these questions, the cause of loss will be further itemized 
under the two heads above distinguished. 

A. INADEQUACY OF CONTRACT PRICES. 

This resulted from the following causes : 

1 . The novelty and extreme difficulty of the problem of combining 
high speed with greater structural strength and more exacting require- 
ments for equipment, carrying capacity, conveniency, comfort, and 
habitability, than had ever before been required in boats of this class. 
The difficulty of this problem could not be fully appreciated until 
tested by actual experience. It was underestimated, and undoubtedly 
would have been underestimated even if all the builders had had 



38 TOEPEDO BOATS AND TOEPEDO-BOAT DESTEOYEES. 

experience on previous types of torpedo boats, and even if detailed 
drawings and specifications had been prepared in advance. 

2. The fact that detailed drawings and specifications were not pre- 
pared in advance so that very few options or even estimates could be 
obtained from manufacturers, and the amount and character of mate- 
rials and labor required could not be estimated by the contractors on 
any accurate basis, or, in view of the novelty of the problem, on any 
basis even approximately accurate. 

3. The requirements as to kind and quality of material, supple- 
mented by the most exacting tests by the government inspectors, 
calling for the use of a higher and much more expensive grade of 
materials than had ever before been used for the same purposes. 
The necessary cost of such materials, applied to these purposes and 
subjected to these tests, was underestimated, and undoubtedly would 
have been underestimated had detailed drawings been available — 
though in that case the builders might have been able to obtain 
options by which they could have thrown some of the loss on the 
manufacturers. See note below on material prices. 

4. The miscalculations of the department, as to design, displace- 
ment, and horsepower, necessitating changes of design and the use of 
additional material to prevent excessive vibration and provide suffi- 
cient structural strength, thus largely increasing the total weight of 
the boats; necessitating also an increase over the contemplated horse- 
power to obtain an acceptable speed, thus largely increasing the cost 
of the engines. Under the terms of the specifications nearly all these 
changes could be made and were made without any allowance for 
extras. In preparing their bids, however, in the absence of detailed 
drawings, the contractors had practically nothing to go by, except 
the estimates and requirements of the department as to general 
weight of design, total displacement, and horsepower. Such esti- 
mates as they were able to prepare had to be based on this data, all 
of which proved to be erroneous. 

5. The similar miscalculation of the department as to the time in 
which the work could be done, affecting very seriously the item of 
general expenses. See note on time of construction below. 

6. The constant stiffening of requirements by the department in- 
spectors during all the period of construction, which the terms of the 
specifications permitted, and which resulted in better boats than 
could otherwise have been secured and more serviceable boats than 
any previously constructed here or elsewhere, but which proved very 
expensive to the builders and which they had no reason to anticipate. 
Similar provisions are contained in all naval specifications, but the 
power thus given was exercised in this case to an unprecedented de- 
gree. Any naval contract in which this power was similarly exer- 
cised would result in a disastrous loss to the builder: 

7. The inexperience of the builders. Only one had ever completed 
any torpedo boats, and those boats were of so much less exacting 
requirements that experience of their cost was misleading rather than 
helpful. Four other builders had torpedo boats under construction, 
but as reported by Secretary Long (S. Doc. 112, p. 137) had not ad- 
vanced far enough with them to gain experience of practical value 
in making bids, and these boats also were of so much simpler require- 
ments as to furnish no basis for just comparison. Five of the build- 



TORPEDO BOATS AXD TORPEDO-BOAT DESTROYERS. 39 

ers had never done any naval work. With one partial exception, 
none of the contractors had ever attempted, or had an} T occasion, to 
study, as the Government had done, the general problem of torpedo- 
boat construction, and the materials, designs, and methods by which 
the superior results desired and ultimately attained in the new boats 
could be secured. The Bath Iron Works had purchased a set of plans 
from the leading French builder, and their representative had spent 
some time in his yard. But the new boats had in several respects 
more exacting requirements than any of the French boats and sub- 
sequent experience showed that these requirements (some of which 
were not specified in advance but were imposed by the government 
inspectors during construction) increased the difficulty and cost to 
an extent which neither the department not the builder did anticipate 
or could reasonably have anticipated. In the absence of the ex- 
perience only to be gained by completing and testing boats of similar 
requirements, any inferences drawn from comparison of the costs of 
previous boats of different types was, for the reason stated under No.' 
1 above, only calculated to produce a feeling of false security in accept- 
ing estimates which afterwards proved to be entirely inadequate. 

8. The short time allowed for bids, from July 3 to August 23, 1898. 
For the reasons above stated an approximate estimate of the cost 
of such boats as were ultimately built could have been reached only 
by collecting all possible data as to previous boats, making an elabo^ 
rate study of the engineering problems, working out the designs in 
detail, experimenting with the materials required, calculating weights, 
strains, horsepower and speeds, and considering carefully every ele- 
ment entering into the complicated problem. Even then there would 
have been room for large error, as experience with these boats after- 
ward proved. The department experts had studied these problems 
and attempted to work them out. Their estimates proved to have 
involved serious miscalculations. If the builders had had the time 
to collect all the available data and study thoroughly all the elements 
of the problem, they probably would have gone as far astray as the 
department did. But they had no adequate time in which to study 
so difficult and complicated a problem, and they necessarily relied 
on the estimates of the department experts as the most reliable data 
available. 

9. The assurances given by the department officials, that the upset 
prices would allow an ample margin. (See letter of Admiral Melville, 
hearing of Feb. 16, 1906, pp. 13 and 14, confirming the testimony of 
the builders before the committees.) The estimates of the depart- 
ment had proved reliable in the past, and the department felt sure 
they were adequate in this case and so assured the builders. The 
builders knew the department had made a study of the problem which 
they themselves had had no sufficient opportunity to make, and 
they had every reason to suppose the department knew more about 
it than they did. 

For the reasons Nos. 1, 2, 3, 7, and 8 above, the builders as a 
practical matter had to rely almost entirely on the estimates of the 
department ; they were further misled by the miscalculations referred 
to under Nos. 4 and 5 above, and they could not anticipate or provide 
for the stiffening of requirements referred to under No. 6. There was 
entire good faith on both sides, but the department estimates proved 



40 TOEPEDO BOATS AND TOEPEDO-BOAT DESTEOYEES. 

to be wholly inadequate, and contract prices based on those estimates 
were therefore far below the necessary normal cost of such boats as 
were actually built. 

Looking back at the question now in the light of experience, the 
inadequacy of the department estimates is fully explained by the 
first six reasons above enumerated. But a study of those reasons 
will show that the difficulties and the causes of error could not pos- 
sibly have been fully appreciated in advance, and that when the 
department which had studied the problem was confident that its 
own estimates were sufficient and so assured the builders, the latter 
could hardly have done otherwise than to accept and rely upon those 
assurances. This conclusion is fully supported by the opinions 
expressed in the official reports of the department, and is the basis 
of the department's recommendation in favor of the relief which the 
builders now ask. 

Note on material prices. — The cost to the contractors of the mate- 
rials used in these boats, particularly the hull plates and the forgings, 
was exceedingly high as compared with the plates and forgings for 
previous vessels, the difference being much greater than could have 
been anticipated in advance. Two causes, and possibly three, con- 
tributed to this high cost. In the first place there was a rising ten- 
dency in the price of all materials during the period of construction. 
A much more important reason, however, was the extreme difficulty 
of manufacturing these materials so as to satisfy the government 
tests. This question is discussed at length on pages 50 to 55 of the 
"Statement of the builders." It has also been suggested that there 
may have been an artificial raising of prices for forgings due to the 
monopoly enjoyed by two manufacturers. If this was the case, the 
government requirements had put the builders at the mercy of these 
manufacturers. Exactly how far the high cost of materials was due 
to each one of these three causes it is impossible to say. In view of 
all the evidence, however, it seems doubtful if there was in fact any 
considerable artificial marking up of prices, and it is clear that what- 
ever effect the general rise in the price of material may have had, the 
manufacturers must necessarily have charged very high prices to 
cover the cost of forgings, extremely expensive in the first place, 
and which frequently had to be made many times over to satisfy the 
government tests. In other words, there is reason to believe that 
the greater part of the high cost of materials was a fair and necessary 
cost, considering the difficulty of manufacture, and may therefore 
properly Declassified under the head of " Inadequacy of contract 
prices.' ' 

Note on time of construction. — All of the boats took much longer 
to complete than was contemplated in their contracts, the delay 
proceeding from several causes. In the first place, the materials, 
particularly the forgings, were very difficult to manufacture and 
were subjected to very exacting tests. After many months of work 
on a single forging, it might fail to pass the rigid inspection to which 
it was subjected, and then there must be an appeal to the depart- 
ment involving further delay, or all of the work must be done over 
again. Not infrequently as many as ten forgings had to be made, 
before one was secured which would satisfy the government tests. 
There were only two concerns prepared to take orders for these 
forgings, and they worked night and day for three years to fill the orders 



TORPEDO BOATS AND TOBPEDO-BOAT DESTEOYEES. 41 

for these boats and for other naval vessels building about the same 
time. It would have been impossible for these two concerns, without 
enlarging those portions of their plants adapted to this work, to get 
out the necessary materials in the time allowed in the contract. No 
other concerns in the country had the necessary equipment. This 
was a condition existing when the contracts were made, but as no 
one had any experience of the extreme difficulty of manufacturing 
the materials required, the time that would be required to obtain 
these materials was very much underestimated. 

In a few instances the contractors may have had a legal claim 
against the manufacturers for delay. In most cases, however, the 
manufacturers refused to bind themselves to any fixed time, and where 
there had been a contract on that point the builders were obliged, as 
a practical matter, to waive their legal right in order to get the mate- 
rial at all. Had they been able to recover damages for delay they 
would merely have transferred to the manufacturers an actual loss, 
which, in justice, neither the shipbuilders nor the manufacturers ought 
to bear. 

The working out of the necessary detailed drawings and their 
approval by the department officials also occupied much more time 
than had been anticipated. The general designs of all the boats, 
except those of the Bath Iron Works, were the Government's designs. 
In all cases, however, the builders were, as a part of their work, to 
prepare detailed drawings and submit them to the department. These 
drawings were frequently held up lor a long time, and then they were 
sometimes rejected and new drawings had to be made. Y ith all pos- 
sible diligence on the part of the builders it was impossible to work 
out all the complicated problems involved, complete all the designs, 
and get them accepted, within the time allowed by the contracts, even 
had the department acted with the utmost promptness. In fact, the 
department sacrificed speed of construction to the effort to secure the 
best possible results, and spent a great deal of time in the consider- 
ation of the designs and working out the details. 

More serious still was the delay resulting from the miscalculations 
discussed above. It was practically impossible to know, without the 
test of experience, exactly what weight of hull, power of engine, and 
strength of structure would accomplish the desired results. All of the 
boats developed on their first trials defects which required time and 
repeated trials to remedy, and this resulted in long delays which were 
not anticipated in advance, which, in view of the extreme difficulty 
of the problem, could hardly have been avoided, but which, after the 
experience gained from the construction of these boats, would not 
need to be repeated. 

All these delays were very costly to the builders, partly because 
it always increases the labor cost if work is constantly interrupted 
and resumed, but chiefly because of the increase in general expense. 
While these boats were in the yards and occupying the attention of 
the shipbuilder's force they excluded other work, and if there was a 
delay of a month, or three months, or six months, the items of gen- 
eral expense went on just the same. Other work could not be taken 
on, because the shipbuilders must be ready to resume work on the 
boats whenever the particular delay came to an end. The laborers 
Working directly on the boat could be laid off or transferred to other 
work; there could be no similar interruption of the general expense. 



42 TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 

General expense includes everything not directly chargeable to a 
particular piece of work — such items as foremen, superintendence, 
office expense, taxes, insurance, freight, power, lights, depreciation 
of plant and buildings, water rates, etc. It represents a large item 
in the cost of any vessel, even if conditions are such that the work 
in the yard can proceed without interruption. In the case of these 
boats it took at least twice as long for their construction as if all the 
drawings had been prepared in advance in the form which they 
finally took and all the materials had been obtainable without delay. 
The usual charge for general expense ought, therefore, to have been 
at least doubled in reckoning the actual cost of these boats; yet in 
the returns of actual cost and in the Ramsay Board figures only 
the normal percentage of the labor cost or labor and material cost 
is added for general expense. 

To a considerable extent this loss from delay ought to be classified 
under inadequacy of contract prices, since to a considerable extent it 
was inevitable under the conditions prevailing when the contracts 
were let. In other words, under those conditions the materials could 
not possibly have been obtained, and the necessary problems of 
design could not possibly have been worked out and all the necessary 
drawings made in such time as to permit the completion of the boats 
within the contract period. That part of the delay resulting from 
department miscalculations which had to be corrected may properly 
be charged to excessive cost, in the sense that had correct calculations 
been made in advance much of the delay might have been saved. It 
was hardly possible, however, that so new and difficult a problem 
could have been correctly solved on paper, or in any way except by 
experience and trial. 

However the loss from delay is classified, it was not the fault of the 
builders, and might properly have been figured in their claim for 
relief. Recognizing the facts above stated, the department extended 
the contract time, but it had no power, without the action of Con- 
gress, to make good the money loss involved. 

B. ITEMS OF EXCESSIVE COST. 

As stated above, the actual cost of the boats was in certain par- 
ticulars higher than the fair, normal, necessary cost, under the con- 
ditions prevailing when the contracts were made, of such boats as 
were ultimately built. The causes of this excess were as follows: 

1. Rise in the price of materials and labor. The evidence shows 
that during the time the boats were under construction there was, as 
a result of the general prosperity in the country and the large amount 
of manufacturing and construction work going on, a general rise in 
the price of materials and labor which somewhat increased the cost 
of these boats over what it would have been had the conditions pre- 
vailing in 1898 remained unchanged. The builders freely admit 
that any part of the loss resulting from this cause was a risk which 
they assumed. It represented, however, a comparatively small 
proportion of the total loss. (See note on material prices above.) 

2. Costly experimenting in working out the problems of design, 
horsepower, displacement, structural strength, and speed. The origi- 
nal miscalculations of the department as to displacement, horse- 
power, and structural strength and the extreme difficulty of the prob- 
lem imposed on the builders by the unprecedented requirements as to 



TOEPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 43 

equipment, carrying capacity, convenience, comfort, and habitability, 
with the many tons of dead weight which they involved, not only con- 
tributed to the fixing of upset prices and contract prices far below the 
necessary cost of the boats, as shown under the preceding head, but 
resulted in an actual cost considerably above what it would have been 
had the department calculated correctly the amount of material and 
the general strength of design that would be necessary to give suffi- 
cient strength to the hull and the horsepower of engines which would 
be required to obtain an acceptable speed and if detailed drawings 
adequate to fulfill the requirements of the boats had been prepared in 
advance. The maximum amount of displacement was definitely 
stipulated, and in working out their designs all the builders were 
originally limited to such amount and weight of material as would 
bring the total within the displacement allowed. During the con- 
struction of the boats the department experts were stud}dng the sub- 
ject of torpedo-boat building and learning new lessons from the boats 
which were under construction when these contracts were made and 
were completed while these boats were under construction. As a 
result of this study and experience and of the preliminary trials of 
these boats they discovered their miscalculations as to displacement 
and structural strength, and under the clauses of the specifications 
which permitted them to do so ordered the hulls to be strengthened, 
involving a considerable increase in weight, and made changes in the 
design both of the hulls and of the engines to prevent excessive vibra- 
tion. The increase in weight required an increase in the horsepower 
of the engines, and at the same time the weight of the engines had to 
be diminished. In short, the first trials of all the boats disclosed 
numerous errors which had to be corrected. The result was that a 
great deal of work had to be done twice, and the actual cost was there- 
fore considerably more than it would have cost to duplicate the boats 
after these lessons had been learned. 

3. Delays over the approval of drawings, and further delays result- 
ing from the discovery of the original miscalculations, and the time 
and experimenting necessary to correct them. (See note on "Delay 
in construction" below.) 

4. The excessive number of costly speed trials resulting from the 
discovery at the first trials that the original calculations as to dis- 
placement, structural strength, and horsepower had been erroneous, 
necessitating repeated experimenting and repeated trials to reach the 
solution of the very difficult problem which the requirements for 
these boats involved. 

The four items above enumerated under the heading of excessive 
cost are placed under that head simply because each of them tended 
to make the actual cost exceed the fair, normal, necessary cost, under 
the conditions prevailing when the contracts were made, of such 
boats as were ultimately built. It is by no means clear that the cost 
was excessive in any other sense. So far as the first item is concerned, 
that relating to rise in the price of materials and labor, it was nobody's 
fault, and it could not be helped, but it is not properly the basis for 
any claim for relief. The causes enumerated under the other three 
*items were causes which operated to make the actual cost of these 
boats larger than it need have been if all the lessons learned during 
their construction had been known in advance. The work was based 
on the designs, calculations, and estimates of the department, accepted 



44 TOKPEDO BOATS AND TOEPEDO-BOAT DESTKOYEKS. 

and relied on by the builders, and those designs, calculations, and 
estimates proved to be defective and erroneous. The additional cost 
included under items 2, 3, and 4 was the result of those defects and 
errors. 

If the contractors had had previous experience with boats of 
equal requirements, they might of course have realized and corrected 
these miscalculations at the outset. But they had even less knowledge 
and experience on the subject than the department, and necessarily 
accepted and relied on the department's calculations. 

It will be apparent, however, from what has already been said 
of the extreme difficulty of the problem which these boats involved 
that it would have been well-nigh impossible for the most expert 
naval engineers in the world to solve correctly in advance, without 
the test of actual experience, all the complicated engineering ques- 
tions presented. The novelty of the problem and the inexperience 
of both the department and the contractors were part of the condi- 
tions under which the work was undertaken. It could hardly have 
been expected that the first boats ever built with such exacting 
requirements could be constructed, under such conditions, without 
costing considerably more than it would cost to duplicate them 
after the problems had once been worked out by actual experience. 

For a fuller and more adequate treatment of all the matters above 
briefly stated, reference is made to the "Statement of the builders" 
hereto appended. 

The causes of the builders' loss having been examined and classified, 
it remains to inquire how far they are entitled to reimbursement for 
this loss. 

For that part of the loss which resulted from the inadequacy of 
the contract prices, as that term is above defined — in other words, 
that part which would be made good if the Government were to pay 
simply the fair, normal, necessary cost of such boats under the 
conditions prevailing when the contracts were made — the builders 
submit that their claim to compensation rests upon sound principles 
of justice, equity, and public policy. For the reasons above enumer- 
ated under the head of "Inadequacy of contract prices," it was 
simply impossible for the builders to know in advance what the 
work would cost, and if they were to bid at all there was nothing 
on which they could so reasonably rely as the estimates and assur- 
ances of the department. It is hardly in keeping with the dignity 
and honor of the United States Government, having obtained con- 
tracts under the circumstances above described, at prices for which 
such boats as the Government required could not possibly have 
been built here or elsewhere at that time or any other, to withhold 
payment of the value of what it has received, and the Navy Depart- 
ment at once recognized the equities of the situation and recom- 
mended the case for congressional action. No honorable and fair- 
minded private citizen would under similar circumstances stand 
upon his legal rights and permit a contractor whom he had induced 
by similar assurances to enter into a contract about which the con- 
tractor himself could not possibly have adequate knowledge, and- 
who had conscientiously fulfilled every requirement imposed upon 
him, to be ruined for want of that compensation, outside the terms 
of the contract, which the service rendered was fairly worth. 



TOKPEDO BOATS AND TOEPEDO-BOAT DESTROYERS. 45 

That part of the loss which represents an excess of actual cost over 
what these boats must necessarily have cost if all the lessons learned 
in their construction had been known* in advance, stands upon a 
somewhat dhTerent footine. Leaving out the general rise in prices 
of material and labor, which was unquestionably the builders' risk, 
that increase in expense which was incidental to the working out for 
the first time of a difficult and complicated problem was, for the rea- 
sons set forth above under the head of "Items of excessive cost," to 
a considerable extent directly chargeable to errors in the designs, 
calculations, and estimates of the department. On this account the 
builders mi~ht not unreasonably claim compensation for these losses 
also, and if the result involved a cost to the Government of more 
than it would now require to duplicate the boats, it would still be 
true, as already pointed out, that the first boats built with such novel 
and difficult requirements must naturally cost more than similar 
boats would cost after the problems had been once worked out. 

If it be said that the builders ought to have known they were 
undertaking without experience the solution of a very difficult engi- 
neering problem, on which foreign builders had been worling for 
years before they attained even a measure of success, which would 
still have been insufficient to satisfy all the requirements of these 
boats, and ought therefore to have realized that errors in the depart- 
ment's calculations were likely to develop, involving increase of cost 
and possibly loss to the builders, the answer is that the only way 
they could have protected themselves against such loss was not to 
bid at all. Their bids could not exceed the upset prices, and they 
bid as near those prices as they dared, in view of the competition 
which it was the deliberate purpose of Congress to bring about. It 
was one purpose of the act of 1898, requiring as it did the distribution 
of the contracts among a considerable number of builders, to secure 
the services of contractors not previously experienced in naval work, 
and thus enlarge the list of those on whom the Government could 
rely for future competition. In venturing into a field almost wholly 
new to most of them, the contractors did exactly what Congress 
intended that they should do, and they did it relying on the assur- 
ances of the Navy Department that the work could be done well 
within the prices set. 

It was unquestionably good public policy to induce as many 
competent shipbuilders as possible to take up this type of work, 
that there might be in the future a large number of firms in the 
country experienced in such work, and ready to compete for it at 
any time, or to assist the Government in meeting any sudden emer- 
gency which might arise. To refuse the relief now asked is to throw 
away whatever it might be possible to save of the benefits of that 
policy. If this relief could have been promptly given when first 
recommended by the department, several of the contractors might 
have been saved from the bankruptcy which overtook them, and 
many of them would undoubtedly have been disposed to take addi- 
tional contracts at fair prices, fixed in the light of the experience 
they had gained. As the matter now stands, several of these con- 
cerns failed utterly, and the experience of those which managed to 
survive was so bitter that only the two whose yards are not adapted 
to any other kind of work would now consider a naval contract. 



46 TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 

The same public policy which dictated the distribution of these 
contracts among as many shipbuilders as possible very powerfully 
recommends such a course of dealing with the unfortunate con- 
tractors as will lead them and other firms to feel that the Govern- 
ment can be trusted to deal justly with them. 

Nevertheless, the builders are not disposed to press their claim as 
far as it might justly be pressed. They appreciate the difficulty of 
the problem which the Navy Department attempted to solve; they 
feel no resentment against the department for errors made in good 
faith, and which, looking back at the question, now appear to have 
been unavoidable; they fully appreciate the prompt recognition 
given by the department to their claims; they are prepared to look 
at the matter as a problem which they undertook to solve jointly 
with the Navy Department, and now that experience has shown 
that both the builders and the department greatly underestimated 
the difficulty and the expense necessarily involved, they are willing 
to bear a part of the burden of that error. They have never asked 
compensation for all their loss. But since the department had at 
least a better opportunity to study the question than they, and 
frankly and freely admits its own responsibility, they feel it only 
just that the Government should also bear its share, especially when 
by so doing the Government will have lost nothing to which it was 
equitably entitled, and will pay only that for which it has received 
full value. 

The builders, therefore, ask of Congress only such relief as will 
cover the fair normal, necessary cost of the boats — what they would 
necessarily have cost even if the contractors had had, before they 
began, all the experience which they gained in the building of these 
boats, and had been able to solve at once from that experience 
every problem which the Government requirements presented. 
What they now request is not even the prices which they would have 
asked and ought fairly to have asked in the beginning had they 
known everything they have since learned about the difficulties and 
expense necessarily involved, for such prices would have included a 
reasonable profit, and they ask now for nothing more than the actual 
necessary cost of the boats under the conditions prevailing when the 
contracts were made. 

Of the two bills now before the committee, one calls for the pay- 
ment to each contractor of the sum necessary to make up the fair 
average cost reported by the Ramsay Board. It is true that the 
Ramsay Board's figures were not made up on exactly the line of divi- 
sion herein marked out. They do not include any allowance for 
increase in general expense through delay, although, as pointed out 
above, a considerable portion of the delay could not possibly have 
been avoided, and the increased cost which it involved was a part of 
the absolutely necessary cost under the existing conditions. The 
Ramsay Board did follow, however, the line of distinction above 
marked out in making no allowance for any unusual number of trial 
trips. On the other hand, the board reached its figures for cost of 
material on the basis of the prices actually paid. As those prices 
varied somewhat with different builders and at different times in the 
course of construction, the cost of material, as fixed by the Ramsay 
Board, was a sort of average of the reported cost. It is impossible to 



TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 



47 



say now whether such an average figure includes any part of the gen- 
eral increase in the cost of materials which was the builders' own 
risk, or whether it is no more than material so difficult to manufac- 
ture would fairly have cost on the general scale of material prices 
prevailing in 1898. 

Looking at the evidence as a whole, however, the builders believe it 
to be reasonably clear that the prices fixed by the Ramsay Board are 
no more than the fair, necessary, normal cost of the boats under the 
conditions prevailing in 1898, and the department itself has in sub- 
stance expressed that opinion. 

But if the committee should feel that there ought to be a further 
inquiry into the causes of loss, and the proportion of the loss due to 
each of those causes, the builders will cheerfully furnish further evi- 
dence to the committee, or accept a reference of the matter to the 
court of claims, with directions to inquire into any questions which 
may appear to the committee to call for further investigation, and to 
award compensation to the builders upon any basis which may appear 
to Congress to be just and fair. 

Table showing the percentages of different items making up the fair average cost as reported 

by the Ramsay Board. 

[Note. — The report of the bureaus of Construction and Repair and Steam Engineering, approving the 
report of the Ramsey Board (S. Doc. 112, 58th Cong., 2d sess., p. 7), gives the totals for labor and material 
as determined by the Ramsay Board. The percentage allowed for general expense is given in the testi- 
mony of Admiral Ramsay before the Senate committee, March 14, 1904 (Senate Hearings of 1904, p. 63). 
The following table is based on the evidence thus afforded.] 

TORPEDO BOATS. 



Eair average cost of— 

Labor 

Material 

General expense 

Trials 

Total fair average cost 



dJnount. 



$86, 938 

86,358 

43, 469 

7,535 



224,300 



Per cent 
of total. 



39 

38 

19 

4 



100 



DESTROYERS. 



Fair average cost of— 

Labor 

Material 

General expense 

Trials 

Total fair average cost 




$133, 515 

170, 085 

60, 081 

10,519 



374,200 



Per cent 
of total. 



36 

45 

16 

3 



100 



APPENDIX. 



STATEMENT OF THE BUILDERS OF TORPEDO BOATS AND 
TORPEDO BOAT DESTROYERS TO COMMITTEES ON CLAIMS, 
FIFTY-EIGHTH CONGRESS, REQUESTING RELIEF (S. 4008, H. R. 
10346). 

The Bill. 

Senate bill 4008 and House resolution 10346, entitled "A bill to provide for the 
relief of the Bath Iron Works and others," provides for the payment by the Secretary 
of the Treasury to the builders of certain torpedo boats and torpedo-boat destroyers, 
heretofore authorized by Congress, of the fair average cost of the said boats without 
profit, less the amounts already paid each builder on account of the said boats. The 
payment is to be made only after completion and acceptance. The boats designated 
in the bill and included within its provisions are the 12 torpedo boats and 16 destroyers 
authorized by the act of Congress of May 4, 1898. All but one of these boats are now 
completed and have been accepted by the Government. The builders for whose 
relief the bill is introduced are the following: 

The Bath Iron Works, of Bath, Me. 

George Lawley & Son ''Corporation), Boston, Mass. 

Fore River Ship and Engine Company, Quincy, Mass. 

Gas Engine and Power Company and Charles L. Seabury & Co. (Consolidated), 
Morris Heights, N. Y. 

Lewis Nixon, Elizabethport, N. J. 

William R. Trigg Company, Richmond, Va. 

Columbian I»on Works and Dry Dock Company, Baltimore, Md. 
' Neafie & Levy Ship and Engine Building Company, Philadelphia, Pa. 

Harlan & Hollingsworth Company, Wilmington, Del. 

Union Iron Works, San Francisco, Cal. 

Maryland Steel Company, Sparrows Point, Md. 

The "fair average cost" is to be taken as heretofore determined by a board of naval 
officers appointed by the Secretary of the Navy to investigate and determine the 
proper average cost of the boats in question. 

The purpose of this measure is to make good to the builders of the boats in question 
a substantial part of the very serious actual money loss which they have sustained 
in the faithful and satisfactory performance of. their contracts with the Government 
for torpedo boats and destroyers which the Government has accepted and which are 
now an efficient and valuable part of the navy. 

Grounds for Relief. 

The grounds on which this relief is proposed, briefly stated, are as follows: 

1. That the contracts were placed at a time when neither the Navy Department 
nor the contractors had any sufficient experience on which to base a proper estimate 
of the cost of boats such as the specifications required. , 

2. That it was not reasonably possible for the contractors, within the time allowed 
for making their bids, to estimate even approximately what the boats would actually 
cost, or to take adequate precautions against loss. 

3. That under these circumstances the bids were necessarily and properly based 
very largely upon the upset prices fixed by the Navy Department. 

4. That, as shown by subsequent experience, the contract prices thus fixed were 
entirely inadequate to cover the necessary cost of construction, and the boats could 
not possibly have been built at a cost within the original appropriation. 

5. That the loss to the contractors, which was thus inevitable, was greatly increased 
by several causes not within the control of the contractors, and not properly classed 
among the risks which they assumed, including some causes for which the Navy 
Department was directly responsible. 

48 



TOKPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 49 

6. That the builders continued in good faith to the best of their ability and with 
all reasonable economy in their efforts to make the boats conform to the requirementf 
of the department, and only asked for small modifications after it had become apparent 
that the contract requirements were impossible of fulfillment except by an expendi- 
ture of time and money utterly disproportionate to the advantage to be gained. 

7. That after such modifications were granted by the Navy Department the con- 
tractors satisfactorily completed and delivered the boats and the Government accepted 
them; that the work of the contractors was well and thoroughly done and the boats 
have proved efficient and satisfactory. 

8. That the actual cost to all the contractors was largely in excess of the contract 
price which the contractors have received, so that the Government has obtained the 
boats at a price far below cost, and has profited to the extent of between two and three 
million dollars at the expense of the contractors. 

9. That this situation results from conditions so unusual as both to raise a strong 
equity in favor of the contractors and to remove all risk of establishing an unwise 
precedent. 

It is proposed to pay the contractors, not what would be a fair price for the boats, 
because such a price would include a profit on the actual cost, but merely a sufficient 
sum to cover the fair average cost of the vessels. Even under the provisions of this 
bill the contractors will not be made whole, for in determining the fair average cost, 
as will presently appear, certain expenses necessarily incurred by the builders in their 
earnest efforts to fulfill their contracts have nevertheless, for reasons stated below, 
been disregarded. 

The proposal embodied in the bill is, of course, a somewhat unusual one, and the 
burden is upon those who advance it to produce satisfactory evidence of the facts upon 
which, their claim is based, and satisfactory arguments for its justice and expediency. 
In the present instance the investigation of the facts has been careful and thorough, 
and it is not necessary to take anything upon theory, supposition, or guesswork. A 
brief history of the steps taken to investigate the contractors' claims will make this clear. 

The Investigation of the Contractors' Claims. 

The act of Congress authorizing the construction of the vessels in question was ap- 
proved May 4, 1898. The bids were opened August 23 of that year, and contracts 
were awarded shortly afterwards to the eleven bidders already enumerated, as follows: 

For the torpedo boats. 

Bath Iron Works 3 

George Lawley & Son (Corporation) 2 

Lewis Nixon 2 

William R . Trigg Company 3 

Columbian Iron Works and Dry Dock Company 1 

Gas Engine and Power Company and Charles L. Seabury & Co. (Consolidated) . . 1 

For the destroyers. 

Neafie & Levy Ship and Engine Building Company 3 

William R. Trigg Company 2 

Harlan & Hollingsworth Company 2 

Fore River Ship and Engine Company 2 

Union Iron Works 3 

Gas Engine and Power Company and Charles L. Seabury & Co. (Consolidated) . . 1 

Maryland Steel Company 3 

The builders met with unavoidable delays, as a result of which the Navy Depart- 
ment made considerable extensions in the time allowed for completion. 

On November 11, 1901, the Bureau of Construction and Repair directed two officers, 
Naval Constructor J. H. Linnard and Lieut. L. H. Chandler, to inspect all torpedo 
boats and destroyers then under construction on the Atlantic coast and report to the 
bureau as to the condition of the boats at that time, the prospect of successful com- 
pletion, the causes of delay, etc. These two officers reported at considerable length 
on November 25, 1901 . 

On January 17, 1902, when all of the vessels were nearing completion, a committee 
of the contractors addressed a communication to the Secretary of the Navy, containing 
a statement from each contractor as to the actual cost of the boats up to that time, 
asking slight modifications in the speed requirements of the contracts, and further 
asking reimbursement to the extent of at least one-half of their actual losses. The 

72536— T b i>— 00— 



50 TOEPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 

modification in the requirements of the contracts was granted by the department 
after investigation; the request for reimbursement was properly regarded as a matter 
for congressional action. 

Before referring the question to Congress, however, the Navy Department made a 
careful investigation. The matter was first considered by the bureaus of Construction 
and Repair and Steam Engineering, and those bureaus made a joint report. It was 
then referred to the Board on Construction, which also reported to the department. 
On the recommendation of the bureaus of Construction and Repair and Steam Engi- 
neering a board of naval officers was appointed by. the department on February 26, 
1902, consisting of Rear-Admiral Francis M. Ramsay, U. S. Navy, retired, as presi- 
dent of the board, and Pay Inspector Stephen Rand, Lieut. Commander John R. 
Edwards, and Naval Constructor Lawrence Spear, U. S. Navy, as members. This 
board was instructed to confer with such of the contractors as might be necessary, to 
examine books and vouchers, to take sworn statements or affidavits, and, finally, to 
report to the department what had been the proper average cost of each class of ves- 
sel, torpedo boat, and torpedo-boat destroyer, including all direct charges of material 
and labor, and all proper indirect expenses, but excluding all profit. On April 9, 
1902, the Ramsay Board, after following the instructions of the department as to the 
collection of evidence, reported to the Navy Department, fixing the proper average 
cost, without profit, of each class of vessel. This report was approved by the bureaus 
of Construction and Repair and Steam Engineering. 

On April 25 Secretary Long, then Secretary of the Navy, forwarded to the House 
Committee on Naval Affairs of the Fifty-seventh Congress, in response to a request 
from the committee, a copy of the original request of the committee of contractors, the 
reports thereon of the bureaus of Construction and Repair and Steam Engineering, 
and the Board on Construction, the department's instructions to the Ramsay Board 
and the bureaus, the record of the proceedings of the board, and its correspondence, 
a copy of the report of the Ramsay Board, and the comments thereon by the bureaus 
of Construction and Repair and Steam Engineering. These papers were accompanied 
by a letter from Secretary Long to the chairman of the committee, summing up the 
situation, and expressing the opinion that the circumstances were such as to entitle 
the builders to equitable consideration. All these documents are printed in Senate 
Document No. 112, Fifty-eighth Congress, second session. 

No action was taken on the matter by the Fifty-seventh Congress, as the papers 
were not received until near the close of the session. The bill now pending was 
introduced in both the Senate and the House on January 18, 1904, and was referred, in 
both houses, to the Committees on Claims. Hearings were held before subcommittees 
of both committees, at which representatives of the contractors were examined. 
Rear- Admiral Ramsay and Lieut. Commander John R. Edwards (who was a mem- 
ber of the Ramsay Board) were also examined by the Senate subcommittee, and 
Naval Constructor J. J. Woodward by the House subcommittee. There was also 
presented to the House committee a record of the examination of Rear-Admiral Mel- 
ville before the House Committee on Naval Affairs in 1902. The committee hearings 
have been printed in the usual form. 

Purpose of this Statement. 

T The evidence contained in the three printed documents above mentioned occupies 
about 330 pages. In addition to their total length, the difficulty of obtaining a clear 
understanding of the case by their perusal is increased by the absence of any logical 
arrangement, and evidence bearing upon each separate point must be collected from a 
score of places in the different documents. The purpose of the present statement is to 
gather the material evidence together and present it in such a way that its relation to 
the main question will be easily apparent. The endeavor has been to make the state- 
ment as brief as is consistent with clearness. The presentation will be frankly argu- 
mentative, but every effort has been made not to exaggerate any element unduly or to 
alter the just proportion. The assertions herein contained are in general directly 
established by the evidence in the documents referred to. A few deatils relating to 
earlier torpedo boats, and to the performance in actual service of the boats in question, 
which are necessary to the completeness of the statement, but were not clearly 
brought out in the committee hearings, have been added, chiefly on the authority of 
public records; but the statement contains nothing which the builders are not prepared 
to verify beyond question. 

A. The Builders' Loss. 

That the actual expenditure of the builders properly chargeable to the cost of these 
boats was far in excess of the contract prices, so that the builders in fact suffered a 
heavy loss, is not likely to be questioned. 



TORPEDO BOATS AND TOKPEDO-BOAT DESTROYERS. 51 

The evidence of loss. — All of the builders except the Bath Iron Works submitted 
sworn statements to the Ramsay Board, in which they stated in great detail the cost 
of the boats built or building in their yards. This was done at the request of the 
board. None of the contractors submitting these statements had at that time entirely 
completed all their boats, and it was necessary therefore to estimate the amount 
required for completion. The percentage of cost thus requiring to be estimated was 
small, however, and subsequent experience showed that in almost all cases the estimate 
had been too small rather than too large. This appeared by the testimony before the 
Senate and House committees early in 1904. 

These statements to the Ramsay Board showed an excess above the contract prices 
ranging from $70,000 to §154,000 for each destroyer, and from $91,000 to $114,000 for 
each torpedo boat. In view of the high standing and reputation of the contracting 
firms, such statements alone, with the corrections made by the builders after com- 
pletion, would perhaps be accepted as sufficiently reliable evidence of at least the 
approximate cost of the boats; but the case does not stand on this evidence alone. 
The Ramsay Board visited the works of several of the contractors, examined their 
books and vouchers, which were exhibited freely, and verified the statements sub- 
mitted. They also tested these statements by their own knowledge, and by such 
information and estimates as they were able to obtain from the various bureaus of the 
Navy Department. 

Again, representatives of all the builders except Lewis Nixon and Neafie & Levy 
appeared before either the Senate or the House committee, or both, at the hearings 
early in 1904, and testified and were cross-examined as to the cost of the boats built 
by them. The builders also, in view of the fact that most of the boats had been com- 
pleted since the statements were made to the Ramsay Board, submitted revised 
statements to the committees. This was done by all the builders except Lewis 
Nixon, including the Bath Iron Works and Neafie & Levy. The Nixon boats, as 
will appear later, were then being completed by the Government. 

The Ramsay Board report. — It will be remembered that the Ramsay Board was not 
directed to ascertain the absolute cost of each of the boats, but merely the fair average 
cost. In determining this, as will be shown below, the board disregarded certain 
elements which increased the cost and the builders' loss. Even thu the fair average 
cost reported by the board exceeded the highest contract price by $83,200 for a single 
destroyer, and $56,300 for a single torpedo boat. These figures mean more when we 
consider that the average contract price of the destroyers was only $281,750, and of 
the boats $152,920.83. The report of the board would seem to confirm beyond ques- 
tion the statement of the builders that the boats had cost much more than the contract 
prices. 

Indeed, it does not appear from the evidence that either the officials of the Navy 
Department or the members of the Senate and House committees seriously questioned 
the fact that the builders had suffered considerable losses. There is much additional 
evidence of this fact to which no reference has here been made; but too much space 
has already been devoted to a point on which there is not likely to be any dispute. 

B. The Basis upon Which the Proposed Compensation Has Been Reckoned. 

Under the provisions of the pending bill the contractors would receive the difference 
between the sums already paid them under their contracts and "the fair average 
cost" as determined by the Ramsay Board. The table on the opposite page shows 
the amount which would thus be paid on account of each boat, and also the actual 
cost of the boats as reported by the contractors. It appears from that table that only 
one of the contractors would receive a sum equal to his actual loss. It is necessary 
to consider, therefore, how the Ramsay Board proceeded in fixing "the fair average 
cost" and why the amount so fixed is in all cases but one less than the actual cost. 

Difficulty of fixing the absolute cost. — In the first place it is evident that had the 
Ramsay Board been directed to fix accurately the exact cost of each of the boats 
they must have entered upon a very long and elaborate investigation, or rather twenty- 
eight such investigations. Moreover, it is an exceedingly difficult task to fix with 
absolute accuracy the cost of such a large and complicated piece of work as one of 
these boats represents. For the actual cost of labor and material devoted solely to 
the construction of the boats, an elaborate and thorough examination of books and 
vouchers should give a substantially accurate result; but in the large item of indirect 
expense, which will presently be more fully examined, only a more or less close 
approximation is possible. The attempt to fix the exact cost of each boat would 
therefore have required an immense amount of time and labor and would, moreover, 
have offered more or less room for dispute and difference of opinion. The Department 
in preparing its instructions to the Ramsay Board doubtless desired to avoid these 
objections and to recommend a basis for payment determined by methods so con- 
servative as to forestall all criticism on the score of excessive generosity. 



52 TOKPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 

TORPEDO BOATS. 



Name of boat. 



Bagley 

Barney 

Biddle.... 
Blakeley . . 
De Long.. 
Nicholson . 
O'Brien... 
Shu brick.. 
Stockton.. 
Thornton . 

Tingey 

•Wilkes.... 



Name of builder. 



Bath Iron Works 

do 

do 

Geo. Lawley & Sons 

do 

Lewis Nixon 

do 

Wm. R. Trigg Co 

do 

do 

Colombian Iron Works... 
Gas Engine and Power Co. 



Contract 

price with 

extras and 

ded. c- 

tions.a 



$161, 
161, 
161, 
163, 
1C3, 
167, 
167, 
131, 
127, 
131, 
168, 
148, 



617. 10 
517 10 
517. 10 
884 00 
511 00 
212 14 
212 14 
914 86 
861 86 
140 £0 
7:0 45 
906. 86 



Actual cost 
reported to 
committees. 



§224, 
224, 
224, 

&2?3, 
263, 

c278, 

c278, 
243, 
243, 
243. 
289, 
243, 



614. 63 
614 63 
614 63 
157.00 
666 00 
827. 00 
827 00 
741 97 
741.97 
741 97 
491 21 
189. 39 



Fair aver- 
age cost 
determined 

by Ramsay 
Board. 



$224,300.00 
224,300 00 
224,300 00 
224,300 00 
224,300 00 
224,300 00 
224, 3G0 00 
224, 300 00 
224, 300 00 
224.300 00 
224,300 00 
224, 300. 00 



Contract- 
ors' actual 
loss. 



$63, 097. 53 

63, 097. 53 

63, 097. 53 

109,273 00 

100, 155 00 

111, 614 86 

111, 614 86 

111,827. 11 

115, 880 11 

112,601.47 

120,720 76 

94, 282. 53 



Approxi- 
mate 
amovnt to 
be received 
on vessel 
under oper- 
ation of 
bill, a 



162, 782. 90 
62,782 90 
62,782 90 
60, 416 00 
60,789 00 
57, 087. 86 
57,087.86 
92, 385 14 
96, 438. 14 
93,159 50 
55, 529. 55 
75,393.14 



DESTROYERS. 



Bainbridge [ Neane & Levy 

Barry ' do 

Chauncev j do 

Dale. I Wm. R. Trigg Co 

Decatur | do 

Hopkins 1 Harlan & Hollingsworth 

Co. 

Hull do. 

Lawrence . . 



$287,985.00 ,$411,673.79 
' 287,985.00 | 411,673.79 



Macdonough . 
Paul Jones . . 

Perry 

Preble 

Stewart 

Truxton 

Whipple 

Worden 



Fore River Ship and En- 
gine Co. 
do 

Union Iron Works 

do 

do 

Gas Engine and Power Co, 

Marvland Steel Co 

do 

do 



287, 985. 00 
271, 055. 65 
265,871.25 
295, 038. 60 

295, 038. 60 
282, 064. 12 

282, 064. 12 
294, 610. 00 
294, 610. 00 
294, 610. 00 

286, 925. 73 

287. 421. 25 
287, 043. 33 
286, 727. 17 



411, 673. 79 
431, 545. 45 
431, 545. 45 
449, 355. 00 

444, 909. 00 
446, 581. 11 

446, 581. 11 
351, 783. 07 
351, 783. 07 
351, 783. 07 
382, 114. 33 
420, 341. 56 
421, 944. 70 
419, 736. 43 



5374, 200. 00 
374, 200. 00 
374, 200. 00 
374, 200. 00 
374, 200. 00 
374, 200. 00 

374, 200. 00 
374, 200. 00 

374, 200. 00 
374, 200. 00 
374, 200. 00 
374,200.00 
374, 200. 00 
374, 200. 00 
374, 200. 00 
374, 200. 00 



$123, 688. 79 
123, 688. 79 
123, 688. 79 
160, 489. 80 
165, 674. 20 
154, 316. 40 

149,870.40 
164, 516. 99 

164, 516. 99 

57, 173. 07 

57, 173. 07 

57, 173. 07 

95, 188. 60 

132, 920. 31 

134, 901. 37 

133, 009. 26 



$86, 215. 00 

86,215.00 

86, 215. 00 

103, 144. 35 

108, 328. 75 

79, 161. 40 

79, 161. 40 
92, 135. 88 

92,135.88 
79,590.p0 
79, 590. 00 
79, 590. 00 
87, 274. 27 

86, 778. 75 
87, 156. 67 

87, 472. 83 



a These amounts are subject to small error, as exact allowances for extras are not in all cases available. 

b Including estimate of $5,000 for completion. 

c Taken from statement to Ramsay Board. No report to committees. 

However this may have been, it will presently appear that if the builders are satisfied 
with the compensation proposed, the Government ought certainly to be content with 
the amount. 

The instructions to the Ramsay Board were as follows: 

Method followed by the board. — The board will confer with such of the contractors 
as may be necessary, examine books and vouchers, take sworn statements or affidavits, 
and report to the department what has been the proper average cost of each class of 
vessel, torpedo boat and torpedo-boat destroyer, including all direct charges of ma- 
terial and labor and all proper indirect expenses, but excluding all profit, calling 
upon the bureaus of Equipment, Ordnance, Construction and Repair, and Steam 
Engineering, and their representatives at the yards of the various contractors, for 
such additional information as may be necessary in the premises. 

In pursuance of these instructions the board requested of all the contractors item- 
ized statements, verified by affidavits, showing separately the cost of the labor and 
material which entered into the various parts of the boats, and also the charge for 
indirect expense. Such statements were furnished by all the builders except the 
Bath Iron Works. The reason for this exception will presently be stated. 

After receipt of the sworn statements the board visited the works of four of the con- 
tractors and verified the statements of the cost of material and labor by a thorough 
examination of books and vouchers. The statements of cost were further verified 
as to certain portions of the work by estimates obtained from the bureaus of the Navy 
Department. These estimates covered the proper cost at that time of the engines, 
boilers and other machinery, the electric plant and the outfit other than electric plant. 

The statements of the builders having been thus verified, the board fixed from these 
statements the average cost of material and* labor for the destroyers, and similarly for 
the torpedo boats. To this it was necessary to add the proper amount for general 
expense and for the cost of trials. 



TOEPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 53 

The element of general expense. — The matter of indirect or general expense is evidently 
the one in which there is most room for difference of opinion. This element of cost 
includes a large number of items not properly chargeable to any one piece of work. 
A manufacturer who is to do business without loss must evidently include somewhere 
in his estimates of the cost of his product every kind of expense which is necessary 
to the businesslike conduct of a complete establishment. Among these expenses are 
the salaries of general officers, clerks, stenographers, engineers, firemen, foremen, and 
superintendents; office expenses, taxes, insurance, freight, power, light, heating, 
water rates, depreciation of plant and buildings, repairs, advertising, legal charges, 
telegraph, telephone, etc. The total amount of such expenses will, of course, vary 
more or less from month to month in any one establishment, and their proportion to 
the direct cost of material and labor will vary very largely between different establish- 
ments. Moreover, the proportion of the general expense which theoretically belongs 
to any particular piece of work will depend upon the total amount of work which 
happens to be at the time going on in the yard. 

In practice it is customary to add to the direct cost of material and labor a certain 
percentage for indirect expense. In some establishments this percentage is reckoned 
upon the total cost of material and labor, in others upon the cost of labor alone. The 
size of the percentage is, of course, determined by a comparison between the total 
amount of general expense and the total amount of expense for labor and material or 
for labor alone. 

The percentages which each of the builders of these vessels had thus found it neces- 
sary to charge against each piece of work naturally differed very widely according 
to the size of their establishments and the amount of work on hand. There was, 
moreover, some difference in practice as to the items included. 

In determining what allowance to make for indirect expense the Ramsay Board 
gave a hearing to the contractors, in which the matter was thoroughly discussed, con- 
sidered the items which in their opinion should properly be included, and finally 
fixed upon the percentage which they considered proper. 

No list of the items allowed which purports to be strictly accurate is available, but 
Admiral Ramsay stated that the board did not allow all the items claimed, and the 
comment of the bureaus of Construction and Repair and Steam Engineering upon 
the report of the board contains the following enumeration: "Foremen, superintend- 
ence, office expenses, taxes, insurance, freight, power, lights, depreciation of plant 
and buildings, water rates, etc." 

The percentage finally fixed by the board was 45 per cent of the cost of labor alone 
for the destroyers and 50 per cent for the torpedo boats. These allowances were 
exceedingly conservative, being substantially the lowest adopted in practice by any 
of the contractors. The board was probably anxious to err, if at all, on the side of 
caution. This comparatively small allowance for general expense made "the fair 
average cost" as reported by the board considerably lower than the average actual 
cost as shown by the sworn statements of the contractors. It must be noted that the 
board did not attempt to find the average of the percentages properly charged by the 
builders, but merely fixed a conservative allowance based upon the practice of the 
older establishments. 

Estimate for cost of trials. — To provide for the cost of the trials the board deter- 
mined the proper cost of a single trial, both from the contractors' statements and 
from their own knowledge of the subject, and fixed also upon what they considered 
a reasonable number of preliminary and official trials. Here again no attempt was 
made to average the actual number of trials which had proved necessary for such of 
the boats as had then reached the trial stage. 

It should be clearly understood that the estimates of the board excluded all inter- 
est on invested capital and all profit. The same is true of the builders' statements, 
both to the board and to the committees. 

Summary. — The reasons for the discrepancy between "the fair average cost" as 
reported by the board and the average actual cost reported by the contractors are, there- 
fore, the following: 

In the first place, the board adopted a very conservative percentage for indirect 
expense. 

In the second place the number of trials for which the board allowed was consider- 
ably less than actually proved to be necessary for the majority of the boats. Here was 
a large element of loss, therefore, which the Ramsay Board did not take into account. 
The causes of this loss will presently be stated, and it will then appear that the Ramsay 
Board might properly have included it in an estimate of "the fair average cost." It 
was, however, no part of the duty of the board to investigate the causes of the loss, and 
here again they adopted the conservative course. Moreover, as comparatively few of 
the boats were then completed, the data were not available for fixing the average 
number of trials. 



54 TOKPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 

Finally, since the investigation was made before most of the boats were completed, 
the expense of completion had to be estimated in the builders' statements, and these 
estimates, largely because of the unexpected number of trials required and the unex- 
pected delays which were encountered, proved to be inadequate. 

It will therefore be seen that while the Ramsay Board's "fair average cost" is less 
than the actual cost reported to the committees by any of the contractors, this differ- 
ence does not involve any criticism of the accuracy of the builders' statements, nor does 
it indicate any opinion on the part of the board as to the responsibility for the various 
elements of loss. This latter question the board did not consider. 

It is but just to the builders to add that they have at every stage courted the fullest 
investigation. Admiral Ramsay told the Senate committee that the contractors had 
offered to his board every facility for a thorough examination. The only exception to 
this statement appeared in the case of the Bath Iron Works. This exception was after- 
wards explained by Mr. Hyde, the vice-president of the company, to the committees, 
and the explanation should be stated here. 

The case of the Bath Iron Works. — At the time these contracts were awarded the Bath 
Iron Works were already building two torpedo boats for the Government. When this 
earlier contract was undertaken the officials of the company, knowing that foreign 
governments had built large numbers of torpedo boats, expected that this Government 
also would in course of time add a great many such boats to the navy. Desiring to make 
a successful record with their first boats and thus obtain a legitimate advantage which 
would assure them future contracts, the Bath Iron Works at great expense purchased 
plans and information from the leading French builder of torpedo boats. By this 
means they were enabled to accomplish results of unusual excellence both with their 
first two boats and with those which they built under the act of 1898. At the time of 
the Ramsay Board investigation they still hoped to receive in the future many other 
contracts for torpedo boats, and they thus hoped in time to make up their losses. 
Meanwhile they considered it better business policy to withdraw their request for direct 
compensation, rather than disclose publicly the secret of their success. 

When the committee hearings were held, two years later, the officers of the company 
had come to the conclusion that their expectations were likely to be disappointed, and 
that those who directed the country's naval policy had no present intention of making 
any considerable additions to the existing fleet of torpedo vessels. Under such circum- 
stances there was no longer any reason for seeking to retain the advantage which they 
had secured by the purchase of valuable information, and they joined in the applica- 
tion to Congress, making full disclosure at the committee hearings of the method they 
had adopted. 

We may now return to the results of the Ramsay Board investigation. 

Propriety of the method adopted. — The propriety of fixing the compensation to be 
paid the builders on the theory of an "average cost" might perhaps have raised some 
question had the result involved the payment to several of the contractors of amounts 
largely in excess of their actual losses. In fact, however, as shown by the table on 
page 13, the Union Iron Works is the only contractor which would receive more than 
the actual cost of its work; and in that case the excess is only about $67,000 for three 
boats, as against a total outlay by the company of $1,055,349.22. The boats of the 
Union Iron Works were completed in May, June, and July, 1902, and that company 
has already paid interest on a total loss of $171,519.21 for over two years and a half. 
Altogether, it can not be said that the Union Iron Works would grow rich by the 
operation of this bill. 

But there is a more important consideration in this connection. All the other 
contractors would receive sums less than their actual losses, and six of the eleven 
would still have a loss of over $100,000 each. The entire amount carried by the 
bill can hardly be criticised from the standpoint of the Government, since it is almost 
a million dollars less than the total loss of the contractors. Under these circumstances 
it would seem that no one except the builders has any occasion to object to the unequal 
operation of the method employed. As for. the builders, they fully appreciate the 
promptness with which the Navy Department met their request for relief and set 
about the necessary investigation, and they are not disposed to be critical of the method 
which the department adopted. Meanwhile it was naturally felt that the amounts 
established by this thorough official investigation furnished the most satisfactory 
basis upon which to fix the compensation proposed to be given under the pending bill. 

We may therefore assume that if it shall appear that the builders are entitled to be 
compensated for their losses, no question will be raised as to the amount of compensa- 
tion provided in the present bill. 

Outline of following discussion. — The real controversy, if any, will be on the question 
whether the loss was of such a character and sprang from such causes that the builders 
may properly ask the Government for relief. 



TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 55 

In this connection the principal subjects which we shall consider are the nature of 
the problem which the Navy Department and the builders undertook to solve in the 
construction of these boats; the conditions which rendered accurate estimates of the 
cost in advance impossible; the causes which operated to increase the cost far beyond 
the expectations of the builders or the department; the opinions officially expressed 
upon various phases of the case by officers of the Navy Department and the navy; and 
the value of the results to the Government. 

C. The Difficulty of the Problem. 

The torpedo boats and destroyers to which the pending bill relates were authorized 
by the naval appropriation bill of May 4, 1898. (Ch. 234 of the Statutes of 1898; 30 
Stat. L., 369, 389.) The act provides for the construction by contract of 16 
torpedo-boat destroyers of about 400 tons displacement, and 12 torpedo boats of 
about 150 tons displacement, to have the highest practicable speed, and to cost in all, 
exclusive of armament, not exceeding $6,900,000. 

The advertisement for bids was dated July 3, 1898, and the bids were opened August 
23 of the same year. 

One of the most important elements in the case for the contractors, if not the foun- 
dation of the whole case, is the claim that they undertook, in common with the Navy 
Department, the solution of a new problem, and that their own inexperience and that 
of the department justify, in a large measure, both the inadequacy of the bids and the 
abnormal cost of the boats. It is therefore necessary to a fair understanding of the 
case to examine with some care the stage which had been reached at the time the 
contracts were undertaken in the development of torpedo-boat construction. In 
this connection it will be necessary to state a number of details relating to the earlier 
torpedo boats built in this country, whose bearing upon the present question may not 
be at once apparent. It will appear, however, as the discussion proceeds, that these 
facts have a very material bearing, and in the end both brevity and clearness will be 
served by stating all the necessary facts in regard to the earlier boats at this point. 

Development of the type abroad. — In the building of modern torpedo boats and 
destroyers foreign nations had preceded the United States. The French navy, for 
example, in 1898 had more than 200 torpedo boats built or building. The destroyer, 
which is a type similar to the torpedo boat in construction and purpose, distinguished 
only by its larger size, greater seagoing capacity, and by such incidental differences 
in construction as this involves, had been originally developed in England, beginning 
about 1892. In 1892, 1893, and 1894 some 42 destroyers were ordered by the English 
Government. By the 31st of March, 1901, 90 English destroyers had been completed. 

But in spite of this extensive construction of both types of boat by foreign coun- 
tries, they were still regarded as more or less in an experimental stage. Their use- 
fulness in warfare had not yet been tested. The latest ones, completed in 1898, had been 
ordered before there had been an opportunity fully to test the merits of the earlier 
ones. The original tendency was to sacrifice nearly everything else to speed, with 
the result that the completed boats developed some serious faults. 

Previous American boats. — This Government had been much more conservative, 
and had refrained from ordering large numbers of these boats while their construction 
was still in an experimental stage. Only 11 boats of this general type had been com- 
pleted for the United States Navy in the summer of 1898, the time now under con- 
sideration. These were all torpedo boats. As compared with the boats authorized 
by the new act, 6 of the 11 were much smaller and of a much lower speed. The 
other 5, in speed and displacement, more nearly resembled the new boats. These 5 
were the Foote, Rodgers, and Winslow, having a trial displacement of 142 tons and a 
speed between 24 and 25 knots, and the Porter and Dupont, having a displacement 
of 165 tons and a speed of about 28^ knots. In all these boats, however, speed had 
been secured at the expense of other important qualities. 

The peculiarity of the torpedo boat and the destroyer is, of course, their high speed 
and their relatively small size. This necessitates extremely powerful engines in pro- 
portion to the size of the .boats. At the same time, the weight of hull, machinery, 
equipment, and everything which goes into the boat must be kept as low as possible, 
since obviously the heavier the boat, other things being equal, the more difficult it 
will be to drive her through the water at the desired speed. It is evident that a builder 
who is required by his contract to attain a certain speed, and who is to receive, more- 
over, a price subject to penalties for falling below the contract speed, is required to 
reduce in every way possible within the specifications of his contract the weight 
of every part of the vessel. While the construction must of course be sufficiently 
strong to stand the strain of the speed trials, it may still leave much to be desired from the 
point of view of durability and serviceability. Moreover, the equipment of such boats 



56 TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 

includes a multitude of various appliances which have little or nothing to do with 
the speed of the vessel, but each of which has its proper and necessary use in service. 
The fittings, furniture, etc., and all the provisions for comfort and habitability form 
another necessary part of the construction. Again, the carrying capacity, particu- 
larly for coal and water, is an important element in serviceability. In all these par- 
ticulars of fittings, equipment, and miscellaneous appliances, the builder will neces- 
sarily seek to reduce the weight to the lowest possible minimum, thus to some extent 
sacrificing efficiency of equipment, carrying capacity, convenience, comfort, and 
habitability to the highest possible speed. 

Nor are the builders of the earlier boats to be criticised for this. They were simply 
doing their best to secure the results which the department in placing the contracts 
made of first importance. These were the first high-speed boats built in this country, 
and their building was experimental. The results which they obtained were, doubt- 
less, the best which were possible, considering the inexperience of the builders and 
the department in an exceedingly difficult and special line of work. Indeed, similar 
faults developed in contemporaneous foreign boats. 

Certain of the conditions under which these earlier boats had been constructed are 
important. In the case of the Foote, Rodgers, and Winsloiv the Government had pre- 
pared outline plans and general specifications, but left the builders to work out the 
multitude of details. In the case of the Porter and Dupont the Government prepared 
no plans and practically no specifications. The builders made their own plans and 
worked out the details themselves, with comparatively little supervision from the 
government inspectors. In all five of these boats the builders contracted in substance 
simply for results, and speed was almost the only requirement. They performed their 
contracts in their own way, and obtained the results for which they contracted, and 
the boats were accepted. 

Faults of the earlier boats. — The performance of these boats taught the department, 
however, the wisdom of emphasizing other requirements besides speed. In the Porter 
and Dupont the lightness of the hulls and fittings had been pushed to the extreme. 
The strength of their hulls was criticised by the department experts, and their fittings 
and equipment were unsatisfactory. In the case of the Foote, Rodgers, and Winslow 
the faults were similar, being chiefly, however, in the efficiency and convenience of 
the equipment, the carrying capacity, and the general comfort and habitability of the 
boats. These faults were so serious that a great m^tny changes "were made in the boats 
by the Government after they had been in commission, all. resulting in increase of 
weight and consequent diminution of speed. 

Other boats under construction in 1898. — In addition to the eleven torpedo boats which 
had been completed before the summer of 1898, when the contracts affected by the 
pending bill were awarded, there were already under construction ten other boats of 
his general type. While all of these were rated as torpedo boats, four of them more 
nearly approached in size the English destroyers. These were the Farragut, Stringham, 
Goldsborough, and Bailey. The contract for the Farragut contemplated a displacement 
of "about 273 tons;" but this was not binding upon the builder, and her actual trial 
displacement when completed was only 236 tons. The contract displacement of the 
Stringham, Goldsborough, and Bailey was, respectively, 340, 247^, and 280 tons. The 
first group of English destroyers, ordered in 1892-1894, averaged 267 tons, and those 
ordered in 1895 and the few years following averaged just about 300 tons. The new 
American destroyers, authorized by the act of 1898, were to be boats of about 420 tons. 
The Farragut, Stringham, Goldsborough, and Bailey were, therefore, of a type corre- 
sponding to the English destroyers, but midway between the two kinds of boats 
authorized by the act of 1898. 

Neither these four boats, however, nor the six torpedo boats, strictly so called, which 
were building in 1898, had advanced far enough to furnish much information on the 
problems of construction either to the department or to the builders. 

All these boats had been authorized before the department had had an opportunity 
to learn the lessons taught by the Porter and Dupont, and the Foote, Rodgers, and 
Winslow, and the contracts for them showed the same tendency to an increase of speed 
requirements at the expense of other qualities which markecj the English boats ordered 
about the same time. The Fox, Davis, and Mackenzie, small torpedo boats, had a 
comparatively low contract speed, but the Rowan, a boat of 182 tons, and particularly 
the Dahlgren and Craven, of 146 tons, had very high speed requirements. In the case 
of the Dahlgren and Craven the contract speed was 30 knots, which was the same speed 
required of contemporary English destroyers. The Farragut, Stringham, Goldsborough, 
and Bailey were also to be 30-knot boats, and in the case of the last three this was 
required by the act of authorization. The subsequent experience of these boats, 
although it does not properly belong in a discussion of the conditions prevailing at the 
time the bids for the new contracts were sent in, throws so much light on the general 
question that it may as well be referred to at this point. 



TORPEDO BOATS AND TOEPEDO-BOAT DESTROYERS. 57 

Success of the Dahlgren and Craven. — The Dahlgren and Craven were built by the 
Bath Iron Works. They attained the required speed and proved to be efficient and 
satisfactory boats. It must be noted, however, that these boats were designed only 
for harbor service, and in that respect differed materially from the torpedo boats 
authorized in 1898. 

Moreover the contractors were enabled to accomplish their very successful result 
only by availing themselves of the knowledge and skill gained by the leading French 
builder of torpedo boats in twenty-five years of experience. As already stated, the 
officials of the Bath Iron Works expected that this Government would sooner or later 
build a great many torpedo boats, and desired to make a record with their first boats 
which would give them a legitimate advantage over other builders and assure them 
contracts for future boats. They looked over the whole field and determined that 
M. Normand, of Havre, France, had produced up to that time better results than any 
other builder of torpedo boats in the world. M. Normand had been building such 
boats for a great many years, and had successfully constructed several hundred. 
The Bath Iron Works therefore purchased from him for the Dahlgren and Craven the 
plans, complete in exery detail, of a torpedo boat then under construction by the 
French builder. In addition to the purchase of these plans the vice-president of the 
company and one of his expert employees went to France and remained at the works of 
M. Normand several weeks, studying every detail of torpedo boat construction. The 
advertisement for bids for the Dahlgren and Craven simply called for two torpedo 
boats of the highest practicable speed, leaving all plans and details to the builder. 
The contractors were therefore enabled to follow the plans of the French boat, and 
were given practically a free hand in the work of construction. It is not surprising 
that these methods enabled them to accomplish results which no other American 
builder was able to equal. It was practically as if builders without any experience 
had been competing with M. Normand himself. 

The Bath Iron Works had not secured this advantage without paying for it a very 
large price, which they hoped to make good in the course of time by the construction 
of a great many boats for the American navy. Moreover, the contract price for the 
Dahlgren and Craven per ton of displacement was 40 per cent larger than that of the 
most expensive boat for which the Government had contracted up to that time, about 
75 per cent more than the average price per ton of the boats previously built or author- 
ized, and 10 per cent more than the fair average cost per ton of actual displacement 
as afterwards fixed by the Ramsay Board for the torpedo boats authorized in 1898. 
Even then the Bath Iron Works lost money on their contract for the Dahlgren and 
Graven, for which they do not ask any reimbursement. 

Experience of the other H0-~knot boats. — The other 30-knot boats which were building 
in 1898 show entirely different results. The Farragut had great difficulty in fulfilling 
her contract requirements. She finally succeeded in making the required speed, 
but this was accompanied by excessive vibration, and her hull was so light as to be 
criticised by the department officials for insufficient strength. The Stringham, 
Goldsborough, and Bailey were even less successful. The Goldsborough repeatedly 
failed to make her speed, and her builders finally became involved in financial diffi- 
culties so that the Government was compelled to annul the contract and take over the 
boat for completion. The Stringham never succeeded in making the required speed, 
and has not yet been accepted. The Bailey was completed and accepted, but her 
speed had been accomplished at such a sacrifice of strength as to necessitate extensive 
alterations by the Government after a short experience in service. These changes 
undoubtedly resulted in reducing her speed considerably below 30 knots. 

Navy Department's change of policy. — We may now return to the conditions prevail- 
ing at the time the bids were invited for the new boats. The department had already 
begun to learn from the experience of the Porter and Dupont, and the Foote, Rodgers, 
and Winslow, some of the lessons which were afterwards so powerfully enforced by 
the Farragut, Stringham, Goldsborough, and Bailey. Accordingly the policy of the 
department was changed in two important respects. The highest possible speed was 
no longer regarded as so important as to dwarf all other considerations. The adver- 
tisement for bids specified as the lowest acceptable speed 28 knots for the destroyers 
and 26 knots for the torpedo boats. This change was made in order to make possible 
greater strength, rigidity, and durability of construction. As stated by Naval Con- 
structor Woodward to the House committee such a reduction of the speed require- 
ments was not only justified but demanded by the behavior of the Porter and Dupont 
upon trial. It has since been further justified by the experience above related of the 
other high-speed boats. 

It is interesting to note that a similar change of policy took place soon afterwards in 
England. For the three years preceding 1898 the English Government had been 
ordering destroyers of a speed of 30 knots; but in those ordered a year or two later the 
speed requirement was reduced to 25 and 26 knots, for reasons similar to those which 



58 TOEPEDO BOATS AND TOBPEDO-BOAT DESTEOYEES. 

influenced our own Navy Department. There, as here, it was found that the highest 
speed was purchased only at the expense of other important qualities. 

Increase in miscellaneous requirements. — Had the only change in policy been a reduc- 
tion of speed requirements in favor of strength the problem would have been much 
less difficult than it was. But the attention of the department had been called very 
forcibly to the other elements of equipment, carrying capacity, convenience, comfort, 
and habitability, in which the earlier boats were deficient. Accordingly the require- 
ments for the new boats were made much more exacting along all these lines. The 
matters of equipment in which the standard was thus raised included not only those 
things coming within the jurisdiction of the Naval Bureau of Equipment, but nearly 
everything about the hull and machinery which is not directly related to the speed 
of the boat. All these changes in the specifications resulted in greatly increasing 
the total weight, aside from the hull and main engines. All this added weight must 
be driven through the water, and either there must be a corresponding reduction in 
the weight of the engines and hull, or the power of the engines must be greatly 
increased. 

It must be evident from what has already been said that even with all other ele- 
ments of construction cut down to the lowest possible limit the problem of building 
the engines and hulls so as properly to combine lightness, strength, and power is a 
problem of the greatest nicety. The Porter and Dupont were the only vessels previ- 
ously completed in this country in which these elements had been so balanced as to 
secure a speed equal to that required of the new boats, and in their case there had 
been some sacrifice of strength. In the new boats greater strength of construction 
was demanded, which increased the difficulty of the speed problem, though prob- 
ably no more than the reduced speed requirements would compensate. But when 
the total weight was greatly increased by requirements of equipment, carrying 
capacity, convenience, habitability, etc., having no relation either to speed or 
strength of hull, a new element was brought into the problem. These requirements 
were not only much greater than in the case of the boats previously completed, but 
considerably greater than in those under construction, including the Dahlgren and 
Craven, which were essentially harbor-defense and not seagoing boats, and consider- 
ably greater than in contemporaneous foreign boats. It followed that the added 
strength in the hulls must be secured with as little additional weight as possible, and 
that additional power must be provided in the engines. The great increase in the 
difficulty of the problem which these all-round requirements involved is best illus- 
trated by the fact that while the horsepower of the engines was thus increased, as 
compared with previous boats designed by the department, they were required to 
be at the same time even lighter in weight than previous engines of smaller horsepower. 

This meant an entirely new and much more difficult problem of construction. 

New materials and designs required. — To secure the necessary results in the engines 
the specifications called for a kind of material which had never before been applied 
to this use. The forgings which make up the greater part of the machinery were 
required to be made of nickel steel in place of carbon steel, which had previously 
been used. The improved quality of the steel allowed a lighter construction, but 
introduced new difficulties. The manufacture of nickel steel was comparatively a 
new art, and the material was not only much more difficult to make but also much 
more difficult to work. Again, the plates for the hulls required to be made of steel 
possessing an unusual degree of ductility and tensile strength, and the specifications 
in this respect were more exacting than in the case of previous boats, requiring a 
higher quality of steel than had previously been manufactured for such a purpose. 
Such plates were both very expensive and very difficult to manufacture. 

Nor were these improvements in the quality of material alone sufficient to meet 
the difficulties of the problem. Every part of the boats had to be specially designed 
in order to obtain in the hulls the greatest possible degree of lightness and strength, 
and in the engines not only to secure these qualities, but also to balance them so 
accurately as to reduce the vibration as much as possible, and at the same time con- 
struct all the complicated machinery so as to occupy the smallest possible space. 

In a word, in order to secure such improvements as were desired over the results 
obtained by the best efforts of the builders of previous boats, it was necessary to use 
entirely new materials and entirely new designs. 

The only experience in this country on which the department or the builders 
could rely for assistance in the solution of this problem was that of the first eleven 
boats, notably the Porter and Dupont, and the Foote, Rodgers, and Winslow, and 
it was the faults of these very boats which the Government proposed to correct in 
the new designs. 

Since the department and the builders were thus undertaking the solution of a 
new and difficult problem, it is important to consider how far the attempt had been 
made to work out the problem in advance. 



TOKPEDO BOATS AND TOKPEDO-BOAT DESTROYERS. 59 

Method adopted as to plans and specifications. — It is stated in several of the official 
documents relating to the present case that bids for these vessels were invited on 
the Navy Department plans and also on the bidders' plans, and that part of the boats 
were built on the department plans and part on the bidders' plans. This does not 
mean that the department furnished to the contractors a complete set of detailed 
plans upon which to make their bids. In the course of the construction of one of 
these boats there have to be prepared not only a large number of plans showing the 
general design and construction of the boat, but also detailed drawings of every sep- 
arate poition of the hull, machinery, and electrical and other outfit. The total num- 
ber of drawings required is somewhere in the neighborhood of a thousand, and their 
preparation is the work of many months. In fact, one of the contractors testified 
that the preparation of the necessary detailed plans required about one year's con- 
tinuous work of 50 men. The Navy Department did not attempt to prepare any 
considerable portion of the total number of drawings, but furnished the contractors 
with a set of outline plans consisting of some half dozen sheets of drawings, and a 
printed set of specifications. 

The specifications, like the plans, were not fully worked out. They covered the 
general dimensions, with a general description of the parts required, the arrange- 
ment, and general mode of construction. As we have seen, they defined to a certain 
extent the quality of the material required. But as to the great majority of the 
details the provision was that they should be "as directed" by the department offi- 
cials, or of a design "to be approved" by the department. Even in the quality of 
the material more or less room for discretion was left to the government inspectors. 

When it is said that several of the contractors were awarded contracts upon their 
own plans, this again refers only to the general plans corresponding to those furnished 
by the department, and it must be remembered that if the contractor made any 
changes in the Government's designs the plans were classed as his own. Of the six 
successful bidders for torpedo boats, two bid upon their own plans. These were 
Lewis Nixon and the Bath Iron Works. In the case of Lewis Nixon the departure 
from the Government's plans was not very extensive, relating chiefly to the arrange- 
ment of machinery. The Bath Iron Works bid upon designs entirely then own. 
Of the successful bidders for destroyers, four received contracts upon the depart- 
ment's plans and three upon their own plans. These latter were the Fore Kiver 
Ship and Engine Company, the Harlan & Hollingsworth Company, and the Maryland 
Steel Company. Their designs were modifications of the department's plans rather 
than entirely original plans, though some of the departures were considerable. Con- 
tractors who bid upon their own outline plans were, however, equally subject with 
the others to the direction and approval of the department officials in regard to all of 
the multitude of details covered by the specifications. 

In each of the yards, during the construction of the boats, the Navy Department 
had an inspector of the hull, an inspector of machinery, and an inspector of equip- 
ment, and they had many assistants. The detailed drawings were prepared by the 
builders as the work progressed, and each one must be approved by the department's 
inspector before it could be used. The inspectors had their own ideas, which might 
not agree with the builders', and many of the drawings had to be sent to Washington 
to be passed on by the department officials there. 

The Bath Iron Works followed as far as possible the plans they were using for the 
Dahlgren and Craven, but their new boats were somewhat larger, having a contract 
displacement of 157 tons, as compared with 146.4 tons for the Dahlgren and Craven, 
and the requirements in nearly everything except speed were more exacting. More- 
over, they were equally subject with the other bidders to the approval of their detailed 
drawings by the government inspectors or the department, and to the interpretation 
of the specifications by these inspectors. 

Increase of requirements during construction.- — This language in the specifications, 
requiring that nearly every detail should be "as directed," had been customary in 
previous naval contracts, though in the case of some of the torpedo boats, notably 
the Porter and Dupont, there had been almost no specifications. But in no case had 
the power which such specifications gave to the government inspectors and the Navy 
Department been exercised to anything like the same degree as in the construction 
of the boats now in question. 

As we have seen, it had been the policy in the past to give the builders practically 
a free hand in obtaining the results which the contract required. But the builders 
could not count upon a continuation of this policy, and, as a matter of fact, as will 
be shown more fully below, the department adopted a new policy in connection with 
these boats. Recognizing the increased difficulty of the problem, and desiring also 
to guard against a repetition of the faults which had been noted in the earlier boats, 
the department officials exercised a much more rigid supervision over every detail of 
design and construction than had been customary in the past. This enabled them 



60 TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 

to take advantage of the new lessons which were continually being learned from the 
experiences of the boats already in commission, while the new boats were under con- 
struction. Defects in the details of equipment, fittings, etc., particularly in the 
Foote, Rodgers, and Winslow, from time to time came to the notice of the department, 
and as a result the supervising inspectors were constantly instructed to require this, 
that, or the other part of the new boats to be constructed in a particular way. Strength, 
convenience, comfort, and habitability were thus continually emphasized, and new 
requirements introduced under the general language of the specifications in the light 
of new experience. 

Summary. — The conditions prevailing at the time when bids were invited for the 
new contracts may then be summed up as follows: The department desired to accom- 
plish results considerably in advance of any which had previously been attained in 
this country. They had, as a guide, the experience of only 11 boats, and of these 
only 5 approached sufficiently the size and speed of the new torpedo boats to be 
of any assistance. The art of building torpedo boats and destroyers, still more or less 
experimental abroad, was in its infancy in the United States. The problems were 
still to be worked out. The department itself had still to learn their solution. The 
navy officials did not attempt to prepare in advance more than the most general plans 
and specifications for these boats. The principal difficulties were yet to be solved 
in the course of the construction. It is not surprising that, as we shall see, the depart- 
ment's general designs proved to be in some respects faulty, and their calculations 
as to speed and displacement somewhat inaccurate. 

The builders were in even a worse position than the department, for, as will appear 
below, only one of them had previously completed a torpedo boat, and the four who 
had boats of this general type under construction had not advanced sufficiently to 
obtain much experience of value. 

The difficulty of the problem is very well expressed by Messrs. Linnard and Chandler 
in their report to the Bureau of Construction and Repair, after inspecting the boats 
under construction, in November, 1901. This report says: 

"With the exception of the Bath Iron Works, which bid on its own designs, and the 
Columbian Iron Works, which subsequently went into the hands of a receiver, none 
of the contractors had previously completed torpedo vessels. At the time the con- 
tracts were let the Gas and Engine Power Company had the torpedo boat Bailey under 
construction, but were not far enough advanced with her to have gained valuable 
experience in the matter. The torpedo boats previously built had been generally 
of much smaller size and much lower requirements as to speed, and it is believed 
that those who built them (except perhaps the Herreshoff Manufacturing Company) 
had had considerable difficulty in their completion. The building of successful 
torpedo vessels having the "highest practicable speed' ' is an occupation that requires 
designing talents of a high order and prolonged experience in construction. There 
are comparatively few successful builders of torpedo vessels in the world; but the 
attempt was made in this country to rival the best results attained abroad with designs 
which were not based on the known results of a large number of previous vessels, and 
by builders whose knowledge and experience were of a limited character." 

D. The Impossibility of Accurately Estimating the Cost. 

Having thus examined the nature of the problem confronting the department and 
builders, we shall not find it difficult to understand the inaccuracy of the estimates of 
both builders and department as to the cost of these vessels. 

The advertisement for bids. — As already stated, the act of authorization fixed a maxi- 
mum price of $6,900,000 for the 28 boats. Having in mind the total amount of the 
appropriation and the necessity of providing out of it for the department's expenses 
in connection with the boats and for the payment of extras, the Secretary of the Navy, 
in his advertisement for bids, named an upset price of $295,000 for each of the destroy- 
ers and $170,000 for each of the torpedo boats. The bidders were also furnished with 
the Government's outline plans and with such general specifications as have been 
described above. In the matter of displacement, the department's circular notified 
them that the destroyers must not be under 400 tons nor over 435 tons, and that the 
torpedo boats must not be under 150 tons nor over 170 tons. As to speed, 28 knots 
must be guaranteed for destroyers and 26 knots for boats. The destroyers must be 
constructed within eighteen months and the boats within twelve months, and penal- 
ties were provided for delay beyond this time. No premiums were offered for speed 
above the requirements, but the bidders were notified that they might guarantee a 
higher speed, and that this would be given weight by the department in awarding the 
contracts. 



TOKPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 61 

The act of authorization provided that not more than five of the destroyers and not 
more than four of the torpedo boats should be built by one contracting party. It was 
evidently the intention of Congress that the contracts be distributed as widely as pos- 
sible. The act also provided that the contracts should be awarded by the Secretary 
of the Navy to the lowest best responsible bidder, having in view the best results and 
most expeditious delivery. 

Fourteen firms submitted bids within the time allowed, and eleven of them received 
contracts. Of the other three firms, Richard B. Painton & Samuel H. Randall were 
not shipbuilders and had no plant; John H. Dialogue & Son had no experience with 
this class of work, and the Wolff & Zwicker Iron Works had already three torpedo 
boats under construction for the Government, taxing the capacity of their yard. The 
11 successful bidders are the companies and firms already enumerated, for whose relief 
the pending bill is introduced. 

Inexperience of the bidders . — It is hardly necessary to say that in making bids for the con- 
struction of naval vessels the builders are ordinarily guided by their own past experi- 
ence in building boats of a similar class. They have figures showing with very close 
approximation what such boats have cost them in the past, and these figures form the 
basis of any bid they may make for new work. Other elements doubtless enter in. 
They may be able to see where they can profit by their past experience and cut down 
the cost in certain places. They have to consider any changes that have taken place 
or are likely to take place in the cost of labor and materials. They have also to con- 
sider such differences as there may be between the boats for which they are bidding 
and those they have previously built. The designs of battle ships and cruisers, for 
example, have doubtless varied considerably as naval architecture generally, and in 
this country in particular, has progressed; but such changes and developments are 
not comparable with the difference between battle ships, cruisers, and gunboats on the 
one hand and torpedo boats and destroyers on the other. 

In the present instance the successful bidders had almost no previous experience 
with similar boats to guide them. The Columbian Iron Works was the only one which 
had previously completed any torpedo boats. The Gas Engine and Power Company, 
Bath Iron Works, Union Iron Works, and Harlan & Hollingsworth then had torpedo 
boats under construction. 

The boats previously built by the Columbian Iron Works were the Foote, Rodgers r 
Winslow, and McKee. The McKee was only a 65-ton vessel, with a speed just under 
20 knots. The Foote, Rodgers, and Winslow have already been described. They were 
142-ton vessels, with a speed between 24 and 25 knots. The new contract awarded 
to the Columbian Iron Works was for one torpedo boat, the Tingey, with a contract 
displacement of 165 tons and a contract speed of 26 knots. The principal difference 
between the Tingey and the boats previously built by the same company was not, 
however, in displacement or speed, but, as already shown, in the greatly increased 
requirements as to equipment, carrying capacity, convenience, and habitability, 
making the problem of construction much more difficult and complicated and requir- 
ing a new kind of materials and entirely new and greatly improved designs. As we 
have seen, the detailed plans for the new boats were not worked out at the time the 
contracts were placed, and this fact alone made it impossible for the Columbian Iron 
Works to estimate the increase of cost which the difference in type would involve. 

The entire lack of proportion between the cost of the two types of boat is indicated 
by the fact that the contract cost per ton of the Foote, Rodgers, and Winslow was 
approximately $687, while the average contract price per ton of the new torpedo boats 
was $934.32, and the contract price per ton of the Tingey was $1,018. Subsequent 
experience showed that even this amount was entirely inadequate, the proper average 
cost per ton fixed by the Ramsay Board for the torpedo boats (taking the actual dis- 
placement of the boats as completed) being just about $1,200. 

As already stated, the torpedo boats under construction at the time the new contracts 
were placed were not very far advanced, and the four contractors above named who 
were already building torpedo boats had not yet had an opportunity to gain much 
experience which could be useful to them in estimating the cost of the new boats. 
Harlan & Hollingsworth and the Gas Enigne and Power Company had but shortly 
before laid the keels of the vessels called for by their earlier contracts. The Union 
Iron Works and the Bath Iron Works had but shortly before reached the launching 
stage. Roughly speaking, this means that the latter vessels were about half completed. 
But they were the first torpedo boats which their builders had undertaken, and it 
will be readily understood that in a work requiring such nicety of adjustment in all 
details and such care and perfection in design, the inexperienced builder must be 
very near the completion of his work before he can tell with any degree of accuracy 
how successful he has been and how much his total cost will be. 



62 TOKPEDO BOATS AND TORPEDO-BOAT DESTBOYEES. 

It thus appears that of the eleven successful bidders six had never before attempted 
to build either torpedo boats or destroyers; four had entered upon the construction of 
torpedo boats, but had not yet proceeded far enough to acquire sufficient information 
for estimating cost; and one only had previously completed torpedo boats, but of 
a smaller size and much less expensive and difficult type. 

It may be added that the destroyers differed materially from any boats previously 
built in this country, or, indeed, in England, in the matter of displacement. Their 
contract displacement ranged from 400 to 433 tons, whereas the largest English boats 
completed down to March 31, 1901, were only 334 tons. The nearest approach to the 
new destroyers in this country was the Stringham, with a contract displacement of 
340 tons, whose keel had just been laid by Harlan & Hollingsworth. 

Absence of detailed specifications. — But inexperience was not the only difficulty which 
the builders encountered in making their estimates for these boats. As we have seen, 
only the most general plans and specifications were furnished them, and all the details 
of construction, involving great difficulties of design which required the highest skill 
for their solution, had yet to be worked out. A contractor who bids for naval work 
must form such estimate as he can, from the general plans and specifications, of the 
amount and nature of the work to be done. If he has previously constructed vessels 
of a similar class, and particularly if the vessel belongs to a type in which the principal 
problems of construction have been thoroughly worked out in the past, he can form a 
very accurate idea of the details as they will develop. If the type of boat is entirely 
new to him, and especially if it is a type still in process of development, the general 
plans give him comparatively little assistance. Until the detailed drawings have been 
prepared, only the most general idea can be formed of the number, size, and form of 
the multitude of forgings and castings required and the amount of labor involved in 
working them and putting them together. 

Other elements of uncertainty. — Moreover, in their working out of these details the 
contractors were subject to the approval of the government inspectors, and the speci- 
fications left a very wide margin within which the requirements as to a multi- 
tude of matters were to be subsequently specified. The designs, so far as they were 
furnished, were of a very special and peculiar type, and it was known that in ail their 
details these boats would be special and unlike any other type of boat. Even the 
materials specified were new, and the builders had no experience in working with 
such materials, nor could they judge what their cost would be, as thus applied for 
the first time to this use. Finally, only sixty days was allowed them in the advertise- 
ment for bids within which to make their estimates and prepare their bids. 

Foreign prices not reliable. — Since they had no past experience on which they could 
rely, it is necessary to consider what other sources of information were open to them. 
The first which naturally suggests itself is the experience of foreign builders. As 
already stated, foreign nations, notably France and England, had built a large number 
of these boats. The destroyer was a type of boat originated and developed in England. 
While American firms would have had considerable difficulty in obtaining detailed 
information from these foreign builders, except by paying a large price for it, they 
could doubtless have ascertained the contract prices paid in England for the building 
of boats of this general type. In France the figures are not published, and would be 
more difficult to obtain. Bat it does not follow that the bidders could safely have 
relied upon any estimates based upon foreign prices. 

In the first place, as we have seen, the English destroyers differed considerably 
in size from any American boats, being midway between the American destroyers 
and the American torpedo boats. We have seen also that these English boats had 
developed some of the same faults which the Navy Department in this country was 
seeking to correct in the new boats. The English boats had in general proved to be 
undesirably light, and they were much less complete and comfortable in their fittings 
than the American boats. In other words, there was more or less of the same differ- 
ence between the English boats and the boats proposed to be built in this country as 
between the earlier American boats and the new boats. Until the designs were worked 
out it was impossible accurately to estimate this difference. In a word, the build- 
ing of torpedo boats and destroyers was still in process of development on both sides 
of the ocean. Enough has been said to indicate the difficulty which inexperienced 
builders would have had in selecting particular types of foreign boats as a basis for 
comparison. , 

Again, the principal elements of cost are, of course, labor and material. The act of 
authorization required the builders to use in the construction of these boats material 
of domestic manufacture exclusively. They were not at liberty to purchase anything 
abroad. The prices of steel plates, forgings, and castings in this country and in 
Europe are by no means the same, nor is there any fixed relation between them. A 
comparison will be presented below between the prices which the builders had to 



TOEPEDO BOATS AND TOKPEDO-BOAT DESTROYERS. 63 

pay for their material and the prices charged for the same material abroad. That 
comparison will suffice to show how unreliable the one would be as a basis for esti- 
mating the other. 

The same thing holds true in regard to the cost of labor. The wages paid in this 
country differ widely from those paid abroad. If this were the only difference, it 
would be possible to form some sort of estimate from the relations between the prevail- 
ing wages; for example, in this country and in France; but there is also a considerable 
difference in the degree of productiveness of European and American labor. Only by 
experience in this particular class of work could this difference be estimated. 

As we have seen, the Bath Iron Works purchased for a large sum plans and detailed 
information from the leading French builder of torpedo boats. Although the infor- 
mation thus acquired as to methods of construction proved of great value to them in 
the actual work of building, they found French prices for material and labor so different 
from those in this country as to be of no practical assistance in estimating cost. 

It thus appears that an examination of foreign prices would have been as likely to 
mislead as to assist American builders in forming an accurate estimate of the cost of the 
work before them. A comparison which will be made below, between the actual cost 
of these boats and the prices paid for English boats ordered about the same time, shows 
the figures to be surprisingly close together; but this could only have been learned by 
experience, and could not safely have been predicted in advance. 

Impossibility of obtaining options. — Another method by which it would seem at first 
thought that the builders might have protected themselves against at least a part of 
their loss was by obtaining options from steel companies for the material which they 
were to use in the construction of the boats. It was brought out at the committee 
hearings that builders ordinarily take this precaution before making bids for naval 
work. It was impossible for them to obtain anything more than options, for the terms 
under which naval contracts are awarded forbid the placing of any orders for material 
until the plans have been approved by the department inspectors. Even options, 
however, proved impossible to obtain in the case of the boats in question. 

As shown above, for the greater part of the work new and special materials were 
required. Nickel steel was specified for the forgings and for a few of the plates, and 
for the remainder of the plates the specifications called for a higher quality of steel 
than had previously been required for such a purpose. The manufacture of nickel 
steel was a comparatively new process, and this was the first time it had been used to 
any extent in the construction of vessels in this country. Carbon steel, which had 
previously been used, is much less expensive and much more easily worked. Steel 
makers had as yet little experience with nickel steel, and prices for it had not yet 
become definitely established. Very few firms were ready to take contracts for it, and 
these were not disposed to bind themselves by giving options. The situation in regard 
to the plates for the hulls was substantially the same. 

Moreover, practically every part of these vessels was to be of a new and special 
design. Under these circumstances steel concerns naturally refused to give options 
for forgings and castings at fixed prices until they were furnished with drawings of 
the forgings and castings to be required. These drawings had not been made and 
could not be furnished by the builders. 

Some of the builders were able to obtain options for a small portion of their material, 
but were subsequently unable to enforce them. This, however, belongs to a different 
division of the discussion. It is sufficient at this point to say that none of them were 
able to obtain options on a sufficient quantity of the material to furnish a basis for 
accurate estimates. In fact, they themselves did not know until the plans were 
subsequently worked out what they would require. 

Other sources of information. — The same difficulties which made it impossible to 
secure options made it equally impossible for the builders to estimate the cost from 
an examination of current prices. In the first place there were practically no cur- 
rent prices for materials of the quality required; in the second place, prices of forgings, 
for example, naturally vary considerably, according to the size of the forging and its 
simplicity or difficulty of design; finally, without complete plans and without expe- 
rience in constructing boats of this class it was impossible for the builders to estimate 
the amount of the various materials which they would require. 

We have already seen that no reliable estimate could be based upon the cost of 
previous torpedo boats. It is even more evident that battle ships, cruisers and gun- 
boats, or steel merchant vessels, yachts and launches, would not furnish a safe standard 
for comparison. It is not too much to say that the principal elements affecting the 
cost of torpedo boats and destroyers are the particulars in which they differ from 
boats of every other type. The experience which these builders had had with other 
vessels was therefore only of the most general assistance to them in making their 
bids. As illustrating the entirely disproportionate cost of torpedo boats and destroyers 



64 TOKPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 

reference may be made to the testimony of Mr. Hyde, vice-president of the Bath 
Iron Works, before the Senate committee. Mr. Hyde stated that the cost of gun- 
boats and similar vessels which his firm had successfully built ranged in the neigh- 
borhood of |300 a ton. The average contract price per ton of the torpedo boats and 
destroyers now in question was, respectively, $904.38 and $673.33, and these amounts 
proved to be wholly inadequate. 

Complete plans not of great assistance. — The Bath Iron Works were perhaps in the 
best position to estimate successfully the probable cost of the boats. They had 
purchased from M. Normand complete plans for the Dahlgren and Craven, which 
they proposed to follow as nearly as possible in the new boats for which they were 
bidding. 

Though the new boats were of larger size and of higher requirements as to general 
equipment and fittings, and particularly as to seagoing qualities, and though the 
working out of the designs wal subject to the supervision of the government inspec- 
tors, the possession of the complete plans for the Dahlgren and Craven doubtless gave 
the Bath Iron Works a certain advantage over the other bidders in estimating the 
amount and character of the work involved. But this advantage did not assist them 
very greatly in prep'aring their bids. They were unable to obtain options upon 
their materials, and they found that the possession of these plans by no means made 
up for their want of experience. The statement of Mr. Hyde, vice-president of the 
company, to the Senate committee on this point is as follows: 

"Even given the plans of a boat of that character in absolute detail, unless one 
has had experience as to cost per pound, cost per ton, cost of the different parts of 
the work before him, of completed vessels, and knows the data to be absolutely cor- 
rect, all of the factors you use in making up your estimate, even giving weights, are 
matters of personal judgment." 

Moreover, as Mr. Hyde also pointed out, the cost of the labor required is at least as 
important an element as that of the material, and in boats of such small size is ordi- 
narily greater. Only by experience could it be learned how much labor and of how 
expensive a character would be required to carry out the plans and accomplish the 
results required. 

Summary. — It thus appears that the most important causes of the inability of the 
builders correctly to estimate the cost were, first, their inexperience with this type 
of boat; second, the fact that the materials required were of a character entirely new, 
and the designs equally so; third, the fact that the working out of the plans and 
specifications was subject to the direction of the government inspectors, whose require- 
ments might vary through a rather wide margin; and fourth, the fact that only sixty 
days was allowed them to work out the problem. Had they been allowed time to 
complete their detailed plans, to gather all possible information from a comparison 
of foreign prices and the designs of foreign boats, to examine into the cost of producing 
the kind of material required, to compare the completed designs of these boats with 
boats previously built in this country, and in general to collect such data as were 
available they would doubtless have been better able to approximate the probable 
cost of the boats. There would still have remained many elements of uncertainty. 
Nothing, in fact, could take the place of experience in building boats of this class. 
The problem was too complicated, the material, the designs, the labor and skill 
required of too special a character to allow of reliable comparison based on anything 
except previous experience with boats substantially similar. But even had this 
not been so it was obviously impossible for the contractors to gather anything like 
complete data or prepare anything like detailed estimates from the information 
available within the sixty days allowed them. 

Actual basis of the bids. — Since the contractors were thus entirely at sea, the question 
at once arises on what basis their bids were made. This question is very clearly 
answered in the evidence given before the committees. In a word, the bids were 
based principally upon the Navy Department's estimates of cost. 

The contractors knew that the Government had not determined upon the building 
of so many torpedo boats and destroyers without careful study of the subject by the 
Navy Department. They justly assumed that the amount of the appropriation 
allowed by Congress for the construction of these boats was based upon estimates 
prepared by the Navy Department, which presumably corresponded very closely 
to the upset prices fixed by the department in the advertisement for bids. The 
department had not made its estimates without a much more extended investigation 
than it was possible for the builders to make in the sixty days allowed them. The 
builders had had no such occasion to investigate the question of torpedo-boat con- 
struction. They had every reason to believe that the department knew more about 
the subject than they did. 

Moreover, it had been their experience in the past in the construction of other naval 
vessels that the department's estimates of cost were reliable and that the upset price 



TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 65 

i 
fixed by the department usually allowed a margin for profit. They found, therefore, 
in the department's estimates, as represented by the upset prices, what they natu- 
rally regarded as the most definite and reliable information available within the short 
time allowed them as to the probable cost of the boats . 

For reasons which have already been stated at length, the builders found it impos- 
sible even to attempt the preparation of detailed estimates. They made such general 
estimates as they could from comparison, for example, with the cost per ton of vessels 
of other types, or from the total weight of material contemplated, and the cost per ton 
or per pound of the materials and labor for corresponding parts of other vessels. They 
then compared these estimates with the upset prices. Such estimates taken alone 
were necessarily too indefinite to be reliable, but they served to confirm the confidence 
of the builders in the department's estimates. Thus, for example, they found that the 
upset prices for torpedo boats allowed for a cost per ton over three times as great as 
that of a gunboat. There was obviously nothing in such a comparison to lead inex- 
perienced builders to question the accuracy of the department's estimates upon which 
the upset prices were based. 

It is not strange, therefore, that in the end the bids were based almost entirely upon 
the upset prices. In this the builders were directly encouraged by the department 
officials. The advertisement for bids was published before all the plans and speci- 
fications which were to be furnished in advance of the bids had been completed by 
the Government. Accordingly, several of the prospective bidders, if not all, sent 
representatives to Washington to examine, at the department offices, such of the plans 
and specifications as were ready. As is customary in such cases, these representatives 
also consulted other data in the department records bearing upon the question of tor- 
pedo-boat construction and discussed the probable cost of the various parts with the 
officials of the different bureaus. The department officials believed that the upset 
prices were ample for the construction of boats at a good profit, and they did not hesi- 
tate to express this opinion. 

The experience which both department and builders have since acquired has shown 
to both how imperfect was their knowledge of the difficulties which the problem 
before them involved. But when the work was undertaken the department had at 
least more data than the builders; had had a much longer time in which to consider 
the question, and the department officials undoubtedly believed their estimates to be 
fairly accurate. The builders had no other available source of information which so 
well merited their confidence. They accepted the judgment of the department and 
based their bids on the upset prices. 

Comparison of bids with maximum prices allowed. — Remembering that these prices 
were intended to allow a margin for profit, and that, in the case of previous boats of 
other types, this margin had always proved to be ample, each contractor realized, of 
course, that in order to obtain contracts he must make his bids somewhat less than the 
maximum allowed. Even then, appreciating to some extent the difficulty of the 
work they were undertaking, they bid, as one witness expressed it, as high as they 
dared. In the case of the torpedo boats, the upset price and the contemplated dis- 
placement gave a price per ton of about $1,030. Four of the six successful bidders bid 
at the rate of over $900 per ton. The Bath Iron Works and the Columbian Iron Works, 
who, as we have seen, had slightly more information to go on than the rest, bid at the 
rate of over $1,000 a ton. The next two bids were $970 and $966 per ton. In the case 
of the destroyers the upset price and the contemplated displacement allowed a cost per 
ton of $702.37. All the successful bids except one were at the rate of at least $660 per 
ton, which is practically 95 per cent of the department's allowance. 

By far the lowest of the bids for both boats and destroyers were those of the William 
R. Trigg Company, which built two of the destroyers and three of the boats. That 
company had never been in business before these contracts were placed. It was 
formed for the purpose of building some of these boats. Its members and staff, though 
experienced in various kinds of steel construction, and though one of them had suc- 
cessfully designed the engines of the battle ship Texas, the first modern battle ship built 
in this country, had never before built vessels of any class. They naturally relied, to 
an even greater extent than their competitors, on the sanguine opinions of the depart- 
ment officials. Moreover, they realized that their comparative inexperience in naval 
work would count against them in the award of contracts, and that they could obtain 
contracts only by very low bids. 

The fact that so many of the bidders ventured to bid so high is explained by the 
increased speed which the majority of them offered. As we have seen, the depart- 
ment's circular announced that guarantees of speed above the required limit would be 
given weight in awarding contracts, and seven of the eleven bidders took this method 
to secure the acceptance of their bids, guaranteeing from half a knot to two knots above 
the minimum requirements. Here, also, as we shall see hereafter, they were misled 

72536— t b d— 09 5 



66 TORPEDO BOATS A^D TORPEDO-BOAT DESTROYERS. 

by their inexperience and their reliance upon the superior knowledge of the depart- 
ment. The point of present importance, and one which should not be forgotten, is 
that only about one-eighth of the total loss would have been saved had all the bids 
been up to the maximum allowed by the department. 

Conclusion. — To sum up, it must now sufficiently appear that the inadequacy of the 
bids resulted directly from the inexperience of American builders with boats of this 
type, and their reliance upon the judgment of the Navy Department as to cost. It 
must also appear that such reliance was not only natural, but almost inevitable. It 
appears further that so far as the heavy loss which the builders suffered is attributable 
to the inadequacy of their bids, only about one-eighth of it could have been avoided 
except by refusing to bid at all. They could hardly be expected, in view of their 
inexperience, the novelty of the problem, the difficulty of securing reliable data, and 
the short time allowed them for preparing their estimates, to discover what the Navy 
Department itself did not then imagine, that the appropriation of Congress was alto- 
gether insufficient to cover the cost of the boats proposed. 

That the estimates of the department were, in fact, inaccurate, is not difficult to 
understand in the light of subsequent experience. We have already seen that the 
department had very little advantage over the builders in the matter of experience, 
which is the only safe guide. The few torpedo boats then completed had not been 
built in the government yards, and they were, moreover, of a much less difficult 
and expensive type. The advantage which the department had over the builders 
was chiefly in the much more extended study which the department officials had 
been able to give the problem than was possible to the builders in the brief time allowed 
them. The department had a further advantage in the fact that, while the details 
of the plans and specifications had not yet been worked out, and the general require- 
ments left a considerable margin for subsequent determination, it was the department 
officials, and not the builders, who were ultimately to determine the detailed require- 
ments. These advantages, while they were sufficient to justify the builders in 
accepting the department's estimates as more likely to be reliable than any which 
the builders themselves could have made up from any information available to them 
in the time allowed, were not sufficient to provide against all the uncertainties which 
the problem involved. 

This brings us to a consideration of the circumstances which operated to increase 
the cost beyond all expectation. 

E. Causes of the Extraordinary Cost. 

1. COST OF MATERIALS. 

Reference has already been made to the unusually high quality of the materials 
which the department specifications required for these boats. This was true of the 
plates, the forgings, and the castings. Such high requirements naturally involved 
a higher cost of material, and this of course was evident in advance; but the prices 
actually paid for material were altogether beyond what could possibly have been 
anticipated. 

General rise in prices. — In the first place, there began almost immediately after the 
contracts were placed, and continued during the period of construction, a general 
rise in prices of commodities, due to prosperous times. This undoubtedly affected 
to a certain extent all the material which went into the boats; but only a very small 
part of the excessive cost of the special materials required can be charged to this 
general increase in prices. 

Extraordinary prices of forgings. — This is particularly noticeable in connection 
with the forgings making up the greater part of the machinery. For these the build- 
ers had to pay at the rate of from $1 to |3 per pound. The average price must have 
been at least $1.50 per pound. These prices were far in excess of anything which 
either the department officials or the builders had imagined. Similar forgings for 
ordinary commercial work cost at the time of the committee hearings, early in 1904, 
about 5^ cents a pound, and this it will be remembered was after the general increase 
in prices referred to. Such merchant forgings are not of course of nickel steel nor 
are the requirements in any way comparable with the rigid requirements of the Govern- 
ment for these boats. In merchant practice, it is usual to specify only good soft 
steel. The government requirements, in addition to specifying nickel steel in the 
matter of the tensile strength of the material, went to the very highest limit which 
modern steel making is able to produce. But such an extraordinary difference in 
cost could not possibly have been anticipated. 

The builders found only two steel makers in the country who could make such forg- 
ings. These were the Bethlehem Steel Company and the Mid vale Steel Company. 
Atjeast one other company attempted to make them, but without success. As the 



TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 67 

work progressed the Bethlehem and Midvale companies, which were absolutely over- 
whelmed with orders for forgings for these boats, and ran their forges night and day for 
three years in order to make them, continually increased their prices. It will be 
remembered that in most cases prices could not be obtained until the drawings were 
completed, and it was therefore impossible to place contracts for all the forgings at the 
beginning. 

The prices charged were not only out of all proportion to the prices for ordinary 
merchant forgings, but they were over twice as high as the prices for the same kind of 
nickel steel forgings abroad, even with freight and duty added. The Bath Iron Works 
obtairied, for the sake of comparison, a figure from the Krupp works in Germany, which 
quoted 62 cents a pound delivered in New York, duty paid. As stated above, the 
builders were not permitted to purchase abroad, and the Bath Iron Company paid for 
its forgings purchased in this country an average of over twice as much. 

Finally, corresponding forgings of nickel steel for naval vessels of other types could 
be obtained in 1904 at from 25 to 75 cents a pound. Such forgings are larger and less 
difficult and expensive to manufacture than the torpedo boat forgings. But even 
when thus partially explained, such a difference in price indicates how abnormal was 
the cost of the forgings for the torpedo boats and destroyers. 

There was apparently some difference of opinion between the builders who testified 
before the committees as to the extent to which these prices were justified. Some of 
them expressed the opinion that the prices were artificially raised. by combination; 
that the two steel concerns, realizing that they had the builders at their mercy, took 
advantage of the builders' necessities, and charged prices which were excessive. On 
the other hand several of the builders were inclined to think that the steel makers 
charged no more than was necessary to make them whole. 

Conditions justifying high prices. — There are many reasons to believe that the cost of 
these forgings to the makers must have been very high. In the first place nickel steel 
is an expensive material to manufacture, and a very difficult material to work. It 
requires in many cases special tools, and these tools wear out much more rapidly than 
in the case of carbon steel. The work practically requires a special plant and special 
skill. There were several steel concerns in 1898 making nickel steel for armor, but of 
these the Bethlehem Company was the only one which had a forge. Other forging 
companies had no facilities for making nickel steel. To enter upon this work would, 
therefore, have required of them a large outlay of capital. The Midvale Company 
chose to make this outlay, but other steel concerns did not follow their example. 
There was almost no demand for such forgings outside of the government work, and the 
total amount of this work in proportion to the entire amount of business done in steel 
forgings was too small to tempt many manufacturers to equip the necessary plant. 

Again the Government requirements were so high and their tests so rigid as to make 
the business an exceedingly risky one. A great many forgings were rejected by the 
Government's inspectors, and all the labor spent upon them was then lost to the steel 
makers, and the rejected material had no value except as scrap steel, at about half a 
cent a pound. Not infrequently as many as ten forgings had to be made before one was 
secured which would satisfy the government tests. The cost of the small forgings was 
greatly increased by the fact that there had to be attached to each a piece which could 
be used by the government inspectors for testing purposes. This piece must be a part 
of the forgings when made, in order to make the test of any value. It was then broken 
off and pulled to pieces in the government tests, and the fragments thrown away. In 
the case of the small forgings this additional material for the purposes of the test would 
sometimes be very nearly as large as the forging itself. 

Moreover, the peculiarities of the designs often involved the waste of a very large 
portion of the material. Thus the crank shaft of one of the torpedo boats was a solid 
nickel-steel forging, which, when it went into the lathe, weighed 14,000 pounds. It 
required three months to work it into the desired shape, and when completed it 
weighed 1,300 pounds. The builders paid only for this 1,300 pounds, but in the 
making of it over ten times as much nickel steel had been used up. If after all of 
this material had been used and several months of labor had been spent, the forgings 
failed to satisfy the test, as sometimes happened, it is evident that the loss to the 
maker was not trifling. A succession of such experiences would easily explain how 
the steel makers might have found it necessary continually to raise their prices as 
their experience with this work progressed. 

A typical illustration. — But whether or not the prices were justified by the cost, 
the builders had no choice but to pay them. The following experience is typical: 

The Columbian Iron Works obtained bids from the Bethlehem and Midvale com- 
panies and also from the White Stone Forging and Iron Company, of New York. The 
latter bid was the lowest and the contract was given to that company. It subse- 
quently appeared that the White Stone Company would be unable to furnish the 
forgings. The Columbian Iron Works then applied to the Bethlehem Company, 



68 TOEPEDO BOATS AND TOEPEDO-BOAT DESTROYERS. 

which declined to take any orders, and the forgings were finally obtained from the 
Midvale Company, at $2.30 a pound. 

Similar conditions as to castings. — The conditions in connection with the remainder 
of the materials were very similar to those which prevailed in the matter of the forg- 
ings. Thus the castings, both bronze and steel, were of very difficult construction. 
Only a few firms would take orders for them, and those charged exceedingly high 
prices. 

For example, when the contracts were made steel castings were selling at 12^ cents 
a pound. The general manager of the Maryland Steel Company testified that by 
the time he succeeded in getting his drawings into the hands of the people who made 
the castings the price had advanced to 20 cents a pound, and that price was paid. 

Again, the high-pressure and intermediate pressure-cylinders for the torpedo boats 
were one solid casting, of exceedingly difficult design. Several of the most experi- 
enced foundries refused to have anything to do with a casting of that design. In the 
original construction of the engines for their boats the George Lawley & Son Corpora- 
tion broke three such cylinders. On the trial trip of one of the boats one of these 
cylinders broke, and it took the company over two years to replace it. At the time 
of the committee hearings they were working on the eighth casting for this cylinder. 
Meanwhile they had in the previous year built five or six triple expansion engines 
for high-class commercial work without losing a cylinder. 

The cost of the bronze castings required also increased during the progress of the 
work, but that increase was due largely to the rise in the price of copper, which took 
place shortly after the contracts were placed. 

Extraordinary prices of plates. — The plates for the hulls, like the forgings, required 
a very special quality of steel, possessing an unusual degree of ductility and tensile 
strength in order to make them sufficiently strong and at the same time as light as 
possible. Most of the builders found only one steel concern in the country which 
would attempt to make such plates. This concern, the Allan Wood Company, made 
nearly all the plates for the 28 boats. The difficulty of the work, requiring the very 
highest skill, the severity of the inspection, the many failures and rejections, the 
overwhelming number of orders, made the conditions almost identical with those 
which affected the price of the forgings. Under these circumstances high prices 
were naturally charged, and were entirely justified by the cost of the product. 

The Maryland Steel Company obtained options on this part of their material either 
before making their bids or just afterwards, at substantially the prices prevailing 
before, and these options were carried out, but the prices at which the options were 
given were enormous prices. 

A certain amount of the extraordinary cost of material was undoubtedly due to 
the refusal of the steel makers to perform options which they had given ; but, as we 
have seen, the builders were able to obtain options on only a small proportion of their 
materials, and some of these options were performed ; so that the increased cost charge- 
able to the refusal of the steel makers to deliver at the prices agreed upon was com- 
paratively small. In the great majority of cases no prices were quoted until the 
drawings were made, and the only prices named were the extraordinary prices which 
the builders had to pay. 

Helpless position of builders. — Moreover, even such loss as did result from breach 
of contract on the part of the material men as a practical matter the builders had to 
stand. The steel makers claimed that they were doing the best they could, and 
that they could not afford to carry out their contracts. There was at least consider- 
able basis for such claims, and since the shipbuilders were at the mercy of one or 
two concerns if they were to get their material at all, it was out of the question for 
them to stand upon their legal rights. Any builder who had attempted to do so, 
even if he had succeeded in recovering in his suit, would have found that his last 
state was worse than his first. 

Summary. — To sum up this situation, the steel makers of the country were no 
better prepared for work involving such materials and designs than were the ship- 
builders. They had a very similar problem to deal with. Only a very few of them 
were willing to undertake it at all. But these were in a position which enabled them 
to throw upon the shipbuilders the burden of all the difficulties and expense which 
the solution of this problem involved. 

2. COST OF LABOR. 

General rise in wages. — The labor cost was increased by causes corresponding very 
closely to those which affected the cost of material. In the first place there was, 
during the period of construction, a general rise in the price of labor, due to pros- 



TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 69 

perous conditions and an abundance of demand. Some of the builders suffered also 
from labor agitations and more or less demoralization of labor, such as are likely to 
occur when times are prosperous and the demand is large. 

Scarcity of properly skilled workmen. — Another cause of the high cost of labor, how- 
ever, was necessarily involved in the nature of the work. This work, both because 
of its intricacy and difficulty, and because of the character of the materials to be 
worked, required the highest class of skilled labor. Moreover, the amount of labor 
involved was much larger than anyone had anticipated. At the same time, the 
placing of all these contracts, together with a large number of other naval contracts, 
at a time when all branches of industry were crowded with work, created an extraor- 
dinary demand for labor of the class required, and resulted both in a scarcity of 
properly skilled workmen and in a consequent increase of wages beyond that for 
which the general rise in wages was responsible. 

Delays. — The labor cost was also greatly increased by the many delays in the 
progress of the work, resulting from several causes which are now about to be con- 
sidered. 

It will be remembered that the contract time for the completion of the torpedo 
boats was only twelve months, and that allowed for the destroyers eighteen months. 
This allowance would have been small enough under the most favorable circum- 
stances. One of the builders testified that before the work was begun he did not see 
how it could possibly be completed in that time, but that he also did not see what 
he could do about it. He doubtless anticipated that if it proved actually impossible 
to build the boats within the time set the department would permit an extension of 
time without penalty, just as was in fact done; but neither the builders nor the 
department imagined that any such delays would take place as did result. The 
average extension of time granted in the case of the torpedo boats was nineteen and 
one-half months, and in the case of destroyers thirty months. Such extensions were 
not allowed without careful investigations, satisfying the department that, at least 
so far as the builders were concerned, the delays were unavoidable. We have now 
to examine the causes of these delays. 

3. DELAYS IN OBTAINING MATERIAL. 

Conditions prevailing . — In the first place, it proved to be utterly impossible to obtain 
the necessary materials within the time allowed for the construction of the boats. The 
reasons for this situation are apparent from what has already been said. Only two 
concerns in the country were able to furnish the forgings required. Only one steel 
maker was willing to take orders for any considerable number of the plates. Very 
few foundries would undertake to make certain of the most important castings. These 
few concerns were taxed to their utmost capacity for several years to turn out the 
work required for these boats and for a large number of other naval vessels building 
about the same time. 

It is very likely true, as suggested by one witness before the committees, that the 
steel men might have produced this material more rapidly had they devoted a larger 
part of their plants to the work, and that they gave a preference to other interests 
showing more tonnage. It is equally true that the work could have been done faster 
had a larger number of steel makers gone into the business of furnishing these materi- 
als. But neither of these assertions materially affects the situation. The fact remains 
that the existing plants which their owners chose to devote to this work were taxed 
to their capacity and ran night and day to fill their orders. A few of the results will 
serve as examples. 

Individual experiences. — Reference has already been made to the experience of the 
George Lawley & Son Corporation with a cylinder. They were delayed over three 
years after one of their vessels had reached the trial stage in the effort to replace a 
single important and difficult casting. This same company placed its orders in every 
case regardless of cost on promise of prompt delivery. Without exception the delivery 
of the material was delayed beyond the promised time, and in some cases over a year. 
Mr. Lawley ordered his forgings from the Bethlehem Company by telegraph in ad- 
vance of any other contractor. The crank shafts were not delivered for twelve months. 
As soon as sufficient material arrived, the company ran its machine shop night and 
day for over a year and a half in order to make up for lost time. 

The Bath Iron Works received the last keel plates for its vessels, which are, of course, 
the first things wanted, eight months after the contract time for the completion of the 
boats had expired. 

The Mid vale Company promised to deliver the forgings ordered by the Columbian 
Iron Company in eight months. One of the crank shafts necessary to install the 



70 TOKPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 

engines in the boat was not delivered until December, 1902, four years after it was 
contracted for. 

These examples will suffice to show the difficulty which the builders had in obtain- 
ing any materials to work with. It may be added that such examples are typical,, 
though perhaps among the most striking, and that practically all of the material for 
all the boats was delayed in delivery from several months to two or three years. 

These delays can in no sense be charged against the builders. Being fully aware 
of the short time which their contracts allowed them, they made every effort to place 
their orders as soon as the approval of their Retailed drawings would permit them to 
do so, and they exerted all the pressure they could upon the material men to hasten 
the delivery. This matter was thoroughly investigated by the department when the 
extensions of time were granted. 

Effect of such delays. — It is hardly necessary to say that such delays involved an 
immense increase of cost. Large forces of skilled laborers had to be employed for this 
work, and while they were not, of course, kept on the payrolls idle for long periods, it 
is evident that no large piece of work can be done with the same economy of labor when 
its prosecution is delayed for months at a time. The largest increase of cost resulting 
from delay, however, was probably in the item of indirect expense. It must be appar- 
ent that when a piece of construction lies in the yard and excludes other possible work 
for two or three times as long as would be required for its completion were it not delayed 
the indirect expense which must be charged against that piece of work in order fairly 
to represent its total cost is immensely increased. 

The question of breach of contract. — In some cases the delay in the delivery of mate- 
rial involved a breach of contract on the part of the material men, and theoretically 
suit might have been brought against them to recover the damage resulting; but it is 
true here, as in the matter of prices, that as a practical question the builders were 
obliged to stand the loss. If they had not submitted to these delays with the best 
grace they could they would have been fortunate ever to get their material at all. The 
steel men protested that they were doing their best. As" one of the witnesses before 
the committee expressed it, it would have been a sad day for the contractor who had 
sued the material men for such delays. Being limited as they were to a few large 
concerns, the builders were helpless. 

Moreover, it was only in a small proportion of the cases that the delay involved any 
breach of contract. Most of the builders testified that while the steel men were willing 
to promise informally that they would deliver within a certain time, or to make a 
statement to that effect, they refused to make it a part of the contract. They were in a 
position practically to dictate their own terms. They were crowded with business. 
Naturally they realized the advantage of their position and refused to bind themselves 
to any definite time. They had their own difficulties, as already shown, in meeting 
the rigid inspection of the Government, and these difficulties largely account for 
their inability to keep their informal promises; but here, as in the matter of the cost 
of the material, whether the delays were due to any fault of the steel makers or whether 
they were unavoidable results of the difficulty of the work, and the amount of it 
required, the material men were in a position to throw the burden of the loss on the 
shipbuilders. 

Summary. — It will be seen from the foregoing discussion that a considerable portion 
of the extraordinary cost of materials and the extraordinary delay in obtaining them 
was necessarily involved in the extraordinary quality of the materials required, the 
difficulty of their manufacture, and the fact that the steel industries of the country 
were almost totally unprepared to handle such a quantity of new and difficult work. 
In a word, neither the builders nor the department had any idea that it would cost so 
much to make these materials or that it would take so long to obtain them. Nor, 
under the circumstances, can it be said that they ought to have anticipated these 
conditions. 

If the Government itself had undertaken to build these boats it would have found 
itself equally unable to avoid these delays; and it is unquestionable that if the boats 
had been built in navy-yards they would have cost more than they cost the contractors, 
and would have taken longer to complete. 

Again, a certain amount of the cost of material, especially during the latter part of 
the period of construction when the prices were highest, may perhaps be ascribed to an 
artificial raising of prices due to the virtual absence of all competition for the work. 

Still another cause which affected both the prices of material and the delay in deliv- 
ery, namely, the severity of the government inspection, has already been suggested 
and must now be more fully considered in connection with the general subject of 
department supervision. 



TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 71 

4. BURDENSOME INSPECTION AND SUPERVISION. 

Change in ^t^ntvom-^^^^Z^^ ftS^SStoS 

ofthe department in the matter of^SxW oTS Tssel, to require that the 
It had always been customary in *e building ot ™™ b ™^ d £ ?overnme nt 

plans be ^^^^^^^X^t^iX evidently be exer- 
inspection. But the power urns rese l ve building of previous torpedo boats 

cised with either a light or a heavy hand In ™ ^^ *> t j nspect ors. They had 
the builders had been h f m P e f "^ a f ree Wd 

been made responsible for the 1M ^? ^.fl^ 11 ^ W ay in which practically all 
in their efforts to secure them This is ^^/^^w boats, however, the depart- 
private contracts are performed. In the case on me ne* do 

ment's right of supervision was ex ^ cl . se 4j^ an o ^X p eC ob 4rvance of the specifications 
mean merely that the ^^^^^^T^^ contracts were 
and requirement .of ^^mhto J^fSSanB a considerable discretion was 
St ^ the -oo^^fe^s This Lcretion was exercised m almost every 

case in favo? of the most exte f me 'f^X^v been stated that during the progress 

Addition of new requirements .-It ^ aWy been st ate a ™ • ° ce f earlier 

of the work the department was constantly profiting b> ™ e e ^ a e tiones additional 

boats, and imposing within . the general v ^^ c ^ f ™/^^ bitabi ity . These 
requirements in details of equipment, conienienceco^ y to 

Mdei^hfXh 1 ss'K^spt&ss*--* —d ». 

fications left the inspectors more or less ^^^JXf^reqSremente to the very 
the exercise of ^J^«^^^^ £ mler was able to attain. This* 
highest limits which the utmost ^1 o^f e 8 ^1 ma^ere construction, but 

again, was undoubtedly m the ^ tCTe f ,?/. &e 1 h ^l t _ e ^ich their position enabled 
if imposed on the steel makers an additional ^en a Mch then po.i 
them to shift onto the shoulders of the contrac tore, lh « doe. noi ne 

the steel makers or the contractors desired to use poor or ^f^ d ^ 1 irem e nt8 
but material of an exceedingly high J uall ^ h X auaUtv in fact, than had ever 
originally defined in the specifications-* higher ^ ^ J n ^ ht appre ciably 
before been employed m ^.c^^^^^^^^y^J the quality of the 
have relaxed the severity of their f 8 ^^*^?^ not limited, however, by 

r^evirlv t^^^^^^^ * C0nSid6r »*** S ° 0d 

tremely conscientious performance of ^uti^unea tne ^ equiremen ts of 

of requiring the highest possible ff^%^^^^y^a^ that even a 
the specifications were so extremely ^high it will be re ^"^; rtionate increase 
slight addition to these requirements » involved m ^^ i ^^F^ p rop rtioiiato 
in the number of failures and rejections ^f-^^^S^wverity had never 
increase of cost. The point here ^^J^^^^^^hsd no ade- 

o^wa^on^^ « ** ^ de ^ 

the department's inspection of the ^i^^^PSe about a thousand draw- 
that all these plans, amounting m each c f 8 to JX^essed ancl submitted to the 

^rnmlnl ^^^T^B^^S^ ST^K 

L^nSf belief S^^-^^ni U suLi, the same 



72 TOBPEDO BOATS AND T0BPED0-BOAT DESTEOYEES. 

?om"ed y " I)ePartmen, fOT ap P r0VaI before th « material is ordered or the work 

problem living/ a" rtlSud" Tli£cL the d fPf tment ^-working out a new 
vidually foreseen 8 before h^ "^ encountetd 'fn ^ ,°? W ™J be indb 
these difficulties the builders had tW ™„ > ' i >r ^ the , solutlon of each of 
frequently had theirs The buildeA we. -° ™ ifZ^ ^ S department inspectors 
of their plans. Consultations with ?h Th^^JS^ m SeCUrin / ? Ppr0Val 
great many plans to pass upon for faes an7o,h? rn a al veltTt^' ha ™ g * 
sometimes very slow in getting the work through the hands ' 6 bU ™ W Were 

A-sasr A^totte^rn^r^r?^ cited ' tbe w*- 

undoubtedly the "changes which thfdeXtm^t 1™ de P a .rtment * n o^er 3 cases 
of the boats. But it must be i evident ^W th deluded increased the excellence 
not only considerably Sved tte moiel, nf f h» P **? <**>&* supervision adopted 
greatly in other ways Here aL?n ? t fs L, 1 w^ b 1 t b T per ? d the contractors 
interim designs. Thev w^re as aXnsU th» ' ! be bu,Idel ? desired to furnish 

difficulties involved k i rbothth^CH^o^i PeC i 0rS suc eessfully to solve all the 
with problems l&ri^'toJS^^fc**?^ T ^^nting 
undertaken to prepare the desio™ iwlf „,. ?{, l t ? d tb ^ department either 
follow their own judder,! tKnaf^.S ™ t" °f? haI i d ' left tbe bui Wers to 
^^Uenta B theyicSyw e re%^itrci^^thl Lw e b , een ' ° D the vi &*- s0 

working out his problem b^hav^ to Z™ ?fE *"' he ? continually hampered in 
^a^epti^ 

*5£31ns£ faW £ :r bm,tted as a p r of their pia - tb * 

«fi^?&a?SSS^ »!rfe«e ]u a te 

successful and-satistttory of'alHhe torpXbZf ten^T* ? Xpe h ?. tbe °V 
of the boats was held lb let \vV?, Xl i * ne type "^question, the entire design 

sup^Z°4torr a °:tiSn^ _ ^ section with this matter of department 
4?tTfrcon'Jir-he T fo!low7^^ Ch ' S PUb " Shed ° n pa * e « of " D ««»- . 



TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 73 

called for It is difficult to state how much truth there is in this latter contention 
but it is obvious that in many cases the contractors relied upon the inspecting officers 
to furnish information tor the working out of the details of these vessels " 

It is not intended to repeat at this point the claim which thus appears to have 
been informally made by some of the contractors during the progress of their work 
that had the builders not been hampered by the inspectors the boats would have 
mi^Wn t% ° n8 T l cont ? ac * s P eed : though it will presently appear that there is 
much to justify such a contention. A word should be said, however as to the su°-- 
fnrHno^t ^ con t ractor % had r <*ed upon the inspecting officers for information in 
working out their plans. To a certain extent this was probably true, but the state- 
ment involves nothing to the discredit of the contractors, nor does it contradict any- 
thing which has been said above. Since in nearly every case the outline plans were 
either principally or wholly the department's, and since 'the calculations as to weights 
and displacement, the specifications as to quality of material and the general mis- 
cellaneous requirements were also the department's, and since, moreover, every 
detail of the designs was rigidly scrutinized by the department officials and must 

th^t **\T .^Pfri 1 ' -\ , e lea . 8t 1 which could be asked of *e inspectors was that 
they should give the builders the benefit in advance of the ideas which thev did not 
hesitate to insist upon when the drawings were submitted. Had the builders been 
left tree to work out the details according to their own judgment, they would cheer- 
fully have accepted the responsibility- for the success of the'desio-ns ' 

It is but just to the builders to say that, in spite of the burdensome requirements 
of the inspectors, they conscientiously stood by the obligations of their unequal con- 
tracts and made every effort to perform the most exacting demands made upon them 

importance of this cause of loss.— In the greatlv increased severity of the Govern- 
ment s supervision and inspection is to be found one of the principal differences 
between the construction of these boats and of the earlier torpedo boats. In addition 
to the difficulties and delays resulting from difference of opinion between the builders 
and the department as to the best method of securing certain results, it must be remem- 
bered that the department had no such motive as the builders for keeping down the 
cost, tthile this circumstance, on the one hand, furnishes the principal justification 
tor such rigid inspection, it suggests, on the other hand, how such supervision, when all 
the requirements of the contracts are not determined in advance, may operate to in- 
crease the cost indefinitely. 

The defined requirements of the specifications were sufficiently high to make the 
problem of fulfilling them exceedingly difficult and expensive. In performing them, 
had no further requirements been added, the builders would have been entirely justi- 
fied m cutting down the cost in every particular where the requirements of their con- 
tract permitted. This is the manner in which private contracts are performed, and 
the only manner in which they can be successfully performed. But when these origi- 
nal requirements, which m themselves marked a considerable advance over any 
results previously attained, were constantly increased bv the imperative directions of 
the department, demanding in almost every particular 'left to its discretion a further 
improvement over previous construction, without regard to the cost involved, the 
hopes of the builders tor a successful issue of their undertaking received a final blow 
JNo manufacturer would for a moment consent to do work for anv employer except the 
Government under similar conditions. * 

5. EXCESSIVE DISPLACEMENT AND ACCOMPANYING DIFFICULTIES. 

There remains one other important cause, more or less closelv related to those 
already considered which operated in more ways than one to increase the cost of the 
boats, this was the difficulty which nearly all the builders experienced in attaining 
the required speed, and the necessity of increasing considerably the contemplated 
displacement. " r 

The relation of speed arid displacement. —The nature and principal elements of the 
speed problem have already been discussed. Given the general dimensions and the 
outline plans of the boat, the two important elements affecting speed are, of course 
weight and power. If the weight of hull and engines is cut down below a certain limit 
the construction can not be sufficiently strong to withstand the vibration resulting from 
the extremely high power of the engines. On the other hand, the weight must be as 
small as is consistent with sufficient rigidity or it will require too much power to drive 
it. If the power is increased the difficultv of vibration is correspondingly increased 
and still more weight must be added to both engines and hull . In a word the elements 
must be balanced with the utmost nicety. 

Cumulations as t0 displacement, horsepower, and speed were based in the case of 
these boats wholly on the known performances of other similar boats. A given increase 



74 TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 

in displacement lias in practice resulted in a certain diminution of speed. A given 
increase in power has resulted in a certain increase of speed. From such data it is 
possible to estimate approximately the amount of power which will be necessary to 
drive a boat of a larger or smaller displacement at a given speed. Such data had been 
gathered by the Navy Department and were there on file, and such calculations were 
undoubtedly relied upon by the department in estimating the contemplated speed, 
displacement, and power of the boats in question. 

It will be remembered that the department, in fixing the requirements for these boats, 
adopted a somewhat lower minimum speed than in the case of the previous boats then 
building, in order to favor greater strength of construction. But it will also be remem- 
bered that the contract requirements as to such matters as equipment, carrying 
capacity, fittings, etc., were such as to involve a considerable increase of weight over 
the corresponding parts of previous boats, without in any way contributing to the 
strength of the hull; so that in the end greater power was required in the engines 
without permitting any corresponding increase in their weight. It was attempted 
to compensate for this increased weight of many other parts of the boat by providing 
for the use in both hull and machinery of a much higher quality of material than had 
been previously used, thus effecting a saving in weight. The marked differences 
between these boats and any previously constructed, the comparative inexperience 
of the Navy Department; and the uncertain possibilities of the new materials, all 
rendered the calculations as to speed and weight uncertain, and it is not surprising 
that some errors resulted. 

Contract requirements as to displacement. — The act of authorization called for destroy- 
ers of about 400 tons displacement and torpedo boats of about 150 tons, and the adver- 
tisement for bids followed this language. The circular issued by the department 
stipulated, however, that no bids for boats of less than these weights would be con- 
sidered, and no bids for destroyers of more than 435 tons or torpedo boats of more than 
170 tons. The Government's designs for destroyers contemplated a displacement of 
420 tons and for torpedo boats a displacement of 165 tons. The boats for which con- 
tracts were awarded on the bidders' plans differed in contract displacement only a 
few tons from the contemplated displacement of the government designs; and, as we 
have seen, these bidders' plans, except in the case of the Bath Iron Works, were in 
general only partial modifications of the government plans. 

Necessity j or additional weight. — As the work progressed the contractors found that the 
problem of combining sufficient power with sufficient rigidity presented difficulties 
which could not have been foreseen until the details of the plans were worked out, and in 
many cases not until the preliminary trials. When the preliminary trials began there 
developed in nearly all cases an excessive vibration . The power which the boilers were 
fitted to develop was ample, but when this maximum power was developed the strain on 
engines and hull was tremendous, and the designed displacement, in view of the 
increased requirements in other particulars, did not allow a construction heavy 
enough to stand such a strain. The vibration in some cases was so great that it threat- 
ened to shake to pieces not only the engines but the hulls themselves. To overcome 
this difficulty required many changes, and in particular much bracing and strength- 
ening, all of which tended to increase the weight. While the vibration was thus 
cured the load was increased, and thus one difficulty substituted for another in the 
matter of attaining speed. 

In many cases the necessity for additional weight appeared in the course of the 
construction, even before the trials. In some instances it was foreseen by the builders; 
in many others the heavier construction, and the more elaborate and therefore heavier 
equipment and fittings, resulting from experience on other boats, were ordered by the 
government inspectors. 

Losses resulting. — The final result was an increase of weight over the designed 
displacement which averaged 11^ per cent for the destroyers and about 16^ per cent 
for the torpedo boats. In other words, the proper balance between weight and power 
had not been accurately estimated in advance; and in fact it could be learned only 
by experience. 

The experience, however, was costly. In the first place all this additional material 
had to be paid for, and after what has been said of the prices of material it is evident 
that this meant a very large increase of cost. Again, while these lessons were being 
learned many changes of design were necessary, and much of the work had to be done 
twice. The expense of the unsuccessful trials was another large item. This expense 
includes both the cost of the oil, fuel, etc., required, and the wages of the crews. 
Such boats have to be handled with the utmost efficiency in order to get the greatest 
possible speed from them, and expensive crews had to be kept under employment 
for long periods. Finally, the constant experimenting and repeated unsuccessful 
attempts involved great delays in completion, with a corresponding increase of cost. 



TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 75 

Required speed not impossible. — It is not contended that the department required a 
higher speed than it was possible to attain with boats of the dimensions specified and 
possessing the general requirements in matters other than speed which were called for 
by the contracts. This should be clearly understood. The situation will be plainer 
if we examine some 'of the individual results. 

Nine of the 28 boats attained a speed equal to original minimum requirements, 
though in the case of two of these the successful trials took place after the requirements 
had been modified, and the speed had to be maintained for only one hour, as compared 
with the original requirement of a two-hour trial. 

The Bath Iron Works had offered a speed of 28 knots for their torpedo boats, and this 
was attained without great difficulty. They were obliged to exceed their contract 
displacement, however, by an average of about 7 tons. Moreover, they were enabled 
to accomplish such a result .only by the use of designs which were the product of many 
years' experience in torpedo-boat building by one of the few successful torpedo-boat 
builders in the world . Had either the department or the other builders had a corre - 
sponding experience it would have been reasonable to expect similar results. That 
the other builders approached as nearly as they did to the same success, in an under- 
taking in which so many foreign builders had been unsuccessful, reflects great credit 
on the skill and competency of the American contractors. 

The William It. Trigg Company had secured the acceptance of all three of their 
torpedo boats and one of their two destroyers before the modifications of the contracts 
were granted. They had offered no excess of speed, however, and their success was 
purchased at a heavy cost. 

The average weight of their torpedo boats was increased from 165 to 194 tons and 
of the destroyers from 420 to 470 tons. The actual expenses of their trials were about 
$80,000 for the five boats, as against a previous estimate of $15,000 for that purpose. 
The increase in cost involved in the added displacement was probably even larger, 
requiring as it did the purchase for the five boats of over 185 tons of additional mate- 
rial of the most expensive character — enough to build another boat. 

The other two boats which exceeded the original requirements were the Stewart 
and the Worden. In the case of the Stewart a speed of over 29 knots was accomplished, 
but in that case the builders were permitted by the inspectors to keep down the 
weight at the expense of equipment and fittings, with the result that considerable 
alteration in those particulars was made by the Government after acceptance. 

In the case of the Worden, on the other hand, the speed was attained by increasing 
the weight of the hull and engines until the displacement exceeded that provided 
in the contract by some 60 tons. 

The results accomplished by some of the boats, therefore, suggest that had the 
department refused to modify the speed requirements, all of the builders might sooner 
or later have succeeded in attaining the necessary speed. This could have been 
accomplished, however, only at a cost in time and money entirely disproportionate 
to the advantage to be gained, and the action of the department in modifying the 
requirements was undoubtedly justifiable and wise. It is not necessary, however, 
to argue that question here. We are concerned not with the further expense which 
would have resulted had there been no modification of the requirements, but with 
the expense which was, in fact, incurred. All the boats, whether accepted before or 
after the change in the speed requirements, were enabled to attain an acceptable 
speed only by a very considerable increase over the designed displacement, all of 
which had to be paid for, and in most cases a large number of costly experiments. 
The modification of the requirements merely saved the builders from still further loss. 

Responsibility of the department. — It will be remembered that a majority of the build- 
ers offered a speed in excess of the minimum requirement. Here, as in their estimates 
of cost, they were misled by their inexperience and their reliance on the judgment of 
the department. The department circular stated 28 and 26 knots as the minimum 
requirements, but encouraged the offer of a higher speed by the statement that such 
offers would influence the award of the contracts. This was a fair indication that the 
department considered it possible to attain a higher speed consistently with the other 
requirements of the contracts. A comparison with the performance of previous boats 
favored this conclusion, and calculations based upon the amount of power which could 
be developed by such boilers as were contemplated led to the same result. The diffi- 
culties were not yet foreseen. The builders knew almost nothing about the subject 
themselves, and the department did not properly estimate the complications which 
would result from the much higher requirements in other matters than speed. 

It was as a matter of fact the opinion of the department officials that the minimum 
speed designated would be easily attained; and this expectation would probably have 
been realized had it been possible to make the boats sufficiently strong, and at the 
same time fulfill the exacting requirements in other particulars, with the displacement 



76 TOEPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 

originally designed. The exceedingly disastrous effect, in the matter of speed, of 
"the constant tendency to add additional things for convenience or comfort," it 
emphasized in the report of Linnard and Chandler. The miscalculation as to weight, 
power, and strength, including the failure to make adequate allowance for the effecs 
of the miscellaneous requirements, and for the constant tendenpy to add to those 
requirements, lies, therefore, at the root of the difficulty. For this miscalculation the 
department may fairly be held responsible. 

Had the builders' troubles been due to the additional speed which many of them 
guaranteed, they would still be almost equally entitled to consideration, since they 
were misled by their reliance on the department's calculations. But the action of the 
department in fixing the same modified requirements for all the builders was a recog- 
nition of the fact that even the original minimum requirements were higher than could 
under the circumstances be fairly required of the contractors. 

Difference, in number of trials required. — The increase of cost from an unusually large 
number of trials did not affect all the builders equally. The destroyers of one com- 
pany, for instance, attained their speed at very nearly the first attempt, while another 
company had for one destroyer 36 preliminary trials and 3 official trials, covering a 
period of two years, and for another 19 preliminary and 3 official trials. The experi- 
ence of the other builders varies between these extremes. But, on the other hand, 
the increase of cost from increased displacement, and therefore increased quantity of 
material, very nearly compensate for this difference. Thus the destroyers first men- 
tioned contained an average of 63 tons more material than their contract had contem- 
plated, the largest excess found in any case. On the other hand, the two destroyers 
requiring the largest number of trials were those in which the builder was most success- 
ful in the attempt to conform to the contract displacement, and the boats had an aver- 
age excess of only 20 tons. But this result was accomplished only by expending a 
great deal of pains and money on perfection of design, and by many costly experiments. 

The Bath Iron Works suffered least from the requirements as to speed and dis- 
placement since their excess of weight was only about 7 tons per boat, and they 
attained their speed without any excessive number of trials. But here again their 
advantage was probably fully balanced by the initial expense to which they had 
gone in the purchase of plans and information from M. Normand. 

Comparison with performance of earlier boats. — In connection with this question of 
speed requirement it is interesting to recall the result of previous attempts at high 
speed, as described above. It will be remembered that six boats with a contract 
speed of 30 knots were under construction in 1898. Of these the Dahlgren and 
Craven, small harbor-defense boats built by the Bath Iron Works, made their con- 
tract speed by the assistance of M. Normand's plans. The requirements of the other 
four in other particulars than speed were much lower than those of the boats with 
which the present bill is concerned. Yet two of them attained their speed only at 
the sacrifice of proper strength, and the other two failed to attain it at all. 

Comparison with experience in England. — The experience of the English Govern- 
ment in this connection shows a remarkable similarity to that of our own Navy De- 
partment. The destroyers completed in England for several years prior to 1901 were 
all 30-knot boats. They were about 10 feet shorter than the American destroyers 
and ranged in displacement from 275 to 334 tons. During the time that the American 
boats were under construction it became evident that the English destroyers were 
deficient in strength and. seagoing qualities, and the lesson was enforced by several 
disasters at sea. As a result the admiralty entirely changed its policy. The boats 
recently built, while they are of the same length as the American destroyers, have a 
displacement of about 500 tons and a speed from 25 to 26 knots. Our destroyers as 
actually completed averaged 466 tons, the modified speed requirement was 26 knots, 
and the average actual speed was 27^ knots. 

The conclusion from this comparison therefore agrees entirely with the statement 
above made, that the calculations of the department as to displacement were faulty 
and that the large increase over the designed displacement in the American boats 
was in fact necessary to the proper development of the type of boat desired. 

F. Analysis of the Causes op Loss. 

Classification. — The causes of the extraordinary cost of the boats have been classi- 
fied in the foregoing statement in the manner which seemed most convenient for 
their orderly presentation. It is possible now, in the light of the preceding discussion, 
to analyze these causes and obtain a reclassification which will make clearer their 
bearing upon the question at issue. 

For this purpose the causes of the loss suffered by the builders may be grouped as 
follows : 

1. The inadequacy of the contract prices to cover the necessary cost of the work, 
resulting from the extreme requirements of the contracts as originally defined. 



TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 77 

2. The unprepared condition of the steel industries of the country 

3. The increase of cost for which, in various ways, the Navy Department was 
directly responsible. 

4. The general rise in the price of materials and labor. 

Under the first heading should be placed the greater portion of the high cost of 
materials and a considerable portion of the high cost of labor. 

A certain part of the cost of materials belongs also under the second head including 
the increased cost which undoubtedly resulted from the inexperience of the steel 
makers. The second head also includes such increased cost of labor and o-eneral 
expense as resulted from the extraordinary delays in obtaining materials 

Under the third heading belong the delays and vexations resulting from the un- 
precedented severity of the department supervision and such portion of the cost of 
materials as is chargeable to the extremely severe inspection. Here also belong the 
losses resulting from the department's miscalculations as to speed and displacement 
including the additional material which had to be purchased, the cost of an excessive 
number of trials, and the direct cost and many delays resulting from constant experi 
ments in the attempt to fulfill the speed requirements and at the same time conform 
as nearly as possible to the contract displacement, Finally, this heading includes 
the very serious losses which resulted from the constant addition of new requirements 
the fulfillment of which not only increased the cost directly but added immensely 
to the difficulties of the problem of speed and displacement 

Responsibility. —It will be noted that that portion of the loss which is thus grouped 
under the first two heads could in no way have been avoided either by the department 
or by the builders except by modifying the original requirements of the contract 
that portion is therefore properly chargeable to the inadequacy of the bids and" 
back of that, to the corresponding inadequacy of the appropriation and the upset 
prices. For so much of the loss, in view of all the circumstances above stated it is 
certainly fair to say that the department was in large measure responsible 

• T £ e J auses of loss deluded under the third head were entirely beyond the control 
of the builders, and for that portion the department was directly responsible 
i There remains to be considered only the general rise in the prices of material and 
labor W ere the case not peculiar in other respects these causes of loss would prop- 
erly be regarded as ordinary business risks for which the builders ought to have pro- 
vided in their bids, and it would follow that if they did not choose to make such pro- 
vision against the chances of the future the loss must be their own But before the 
builders could be asked to make provision for such chances in their estimates of cost 
they must have'some definite basis upon which to make such estimates Had it\been 
possible for them in the present instance to prepare anything which could fairly be 
called a definite estimate of cost, we have no right to assume that they would not have 
made allowance for a possible rise in prices and wages. As it was, the majority of 
them bid very nearly up to the limit of the upset prices. 

\ Elements omitted by Ramsay Board.— It is important to recall the fact that one 
important element of loss above enumerated was entirely omitted from consideration 
by the Ramsay Board. This is the loss resulting from the unusual number of trials 
required for most of the boats. It must be apparent from the preceding discussion 
that the equity in favor of the builders in connection with that portion of the loss is 
particularly strong. 

But there is another element of loss which is also not represented in the figures of 
the Kamsay Board and which was probably still more serious. This is the increase 
of indirect expense resulting from delay, the construction of the vessels, in spite of 
the utmost efforts of the builders, extended over a period which averaged more than 
two and a half times as long as the original contract time. The increase of indirect 
expense from such delays must have been very nearly in the same proportion- vet 
trie Kamsay Board, while adopting a percentage for indirect expense which would 
have been very conservative had the work gone forward without hindrance made 
no allowance whatever for this increase from delay. It should be added that in most 
cases the contractors' own statements of cost equally omitted to make adequate 
allowance tor extraordinary delays in the item of indirect expense, allowing the 
same percentage which in their experience they had found it necessary to charge for 
similar work when no such delays occurred. & 

It therefore appears that the theory upon which the compensation proposed by the 
present bill has been reckoned leaves out of account certain elements of loss as to which 
the claim of the builders for compensation is particularly strong. 

As to the inexperience of the builders.— Another probable cause of increased cost has 
not yet been considered . It is doubtless true that the work cost more than would have 
been the case had the contractors been experienced in the construction of such boats 
though there is no means of estimating the amount of this element. That it must have 
been surprisingly small is indicated by comparisons presented below with the cost 
ol English boats, and particularly with certain estimates of proper cost furnished by 



78 TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 

the department bureaus to the Ramsay Board. But it does not follow that the con- 
tractors ought to bear such increase of cost as may have thus resulted. Their inex- 
perience was one of the known conditions at the outset, and the department doubtless 
intended to fix upset prices which would be adequate for the construction of the 
boats by builders generally competent but inexperienced with this particular type. 
Good faith would have required no less. Moreover, the department itself was almost 
equally inexperienced. A large amount of costly experimenting had to be done 
before either builders or navy officials could learn the solution of their problem. It 
would hardly be reasonable to say that the contractors ought to bear all the cost of 
educating both themselves and the Navy Department in the art of torpedo-boat con- 
struction. 

As to competent handling of conditions. — The one element of loss for which the 
builders may properly be held responsible is that which may have resulted from their 
own inefficient handling of the conditions, and the only practicable method of deter- 
mining the amount of this element would be to compare the actual cost in the case of 
the different builders. If the figures showed a wide divergence, it might fairly be con- 
cluded that to a certain extent, though not wholly, this divergence was due to the 
superior competence which some of them displayed. This is the best justification 
for the theory of average cost upon which the present bill is based. While only one 
of the builders will receive the full amount of his loss, the inequality will tend to 
reward the most competent handling of the difficulties which the work involved. An 
examination of the figures shows that the excess of actual loss over the amount payable 
under this bill is largest in the case of the company which entered upon the work with 
the least experience and preparation, while the company whose preparation for the 
work was most complete will receive very nearly the amount of its actual loss. Under 
these circumstances there is little ground for fear that the builders will receive com- 
pensation for losses due to any fault properly chargeable against them. 

G. Comparison ^with'English Prices. 

Contemporary English prices. — In connection with the actual cost of the boats it is 
interesting to compare the cost of similar boats in England. While English prices, as 
already pointed out, would not have furnished a reliable basis for the contractors' 
estimates in advance, because of the uncertainty as to what differences there would 
be in the type of boat and in the details of construction, and also because of the dif- 
ference in the prices of labor and materials in the two countries, they are not without 
some value as a means of comparison after the work has been completed and the data 
necessary for intelligent comparison are available. Thus it proved true in practice 
that the cost of both materials and labor of the same quality was higher in this country 
than in England, and the destroyers built in this country, when the details of their 
requirements came to be worked out, while not of as high speed as the English boats 
ordered about the same time, were characterized, on the other hand, by a higher 
standard as to structural strength and miscellaneous requirements, which must have 
fully compensated for the difference in speed. Yet the average price per ton paid 
for the English boats was $894, as against an average contract price per ton for the 
American boats of $673. At the rate per ton which thus prevailed in England these 
boats would have cost $375,000, almost exactly the fair average cost reported by the 
Ramsay Board, and $93,000 more than the average contract prices of the American 
boats. While it is true that the increased displacement of the American boats would 
naturally reduce somewhat the price per ton, so that the estimate of the prices which 
would have to be paid in England ought to be correspondingly reduced, this reduction 
would certainly no more than compensate for the difference in the cost of labor and 
materials. 

The comparison as a whole makes it tolerably clear that, in spite of their inex- 
perience and the peculiar difficulties which they encountered, the American builders 
completed their work at a cost which compares very favorably indeed with the prices 
actually paid for similar boats in England. 

Earlier English prices. — The English prices referred to in the foregoing comparison 
are those charged for boats ordered about the time the American contracts were placed. 
In this connection it is worthy of note that for earlier English boats of the same general 
requirements the prices per ton had been much lower and had corresponded almost 
exactly with the upset prices fixed by the Navy Department for the American boats. 
This fact suggests the probability that the department was misled by a reliance on 
these earlier English prices. It also indicates that the experience of English ship- 
builders as to estimates of cost may have been somewhat similar to that of the American 
builders. 



TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 79 

H. Statements or Navy Officers and Department Officials. 

The contentions of the builders are in general amply supported by the opinions 
expressed by those officers of the Navy Department and the navy who have had 
occasion officially to comment upon the various phases of the matter. In these 
official comments, however, a few unfavorable criticisms are found which will first 
receive attention. 

If will be remembered that the letter addressed by the committee of contractors 
to the Navy Department, on January 17, 1902, was referred to the bureaus of Con- 
struction and Repair and Steam Engineering, and also to the board on construction. 
The latter board consists of the chiefs of the two bureaus last mentioned, together with 
the Chiefs of the Bureau of Ordnance and the Bureau of Equipment, and the Chief 
Intelligence Officer. Its members at the time were Admirals O'Neil, Melville, 
Bowles, Bradford, and Sigsbee. Four of these officers concurred in a report recom- 
mending both the modification of speed requirements and the financial relief asked 
by the contractors. Admiral Bradford submitted a minority report, which will now 
be examined. 

Admiral Bradford's criticisms. — The majority of Admiral Bradford's criticisms were 
merely in the direction of caution, and have since been met by the thorough investiga- 
tion which the case has received. Many of them are sufficiently answered by what 
has been said in the course of the preceding discussion. • Thus, in the matter of speed 
requirements his criticisms are based upon ^ comparison with the performances of 
the Farragut, Bailey, Porter, and Dupont, and the earlier English destroyers. The 
faults which all these boats developed, and the increased difficulties resulting from 
much higher general requirements in the new boats, tending to make such a com- 
parison unreliable, have already been sufficiently explained. The boats under con- 
sideration much more nearly resembled in general characteristics the later English 
vessels of 25 and 26 knots, and Admiral Bradford's rejection of those boats as a basis 
•of comparison must have resulted from inaccurate information. 

In connection with the subject of financial relief, only two of Admiral Bradford's 
suggestions require separate treatment. He states that "'by means of low bids very 
responsible bidders were excluded from making contracts for these vessels, especially 
the Herreshoff Manufacturing Company, which no doubt coulel have constructed the 
torpedo boats in accordance with the requirements, since the latter were based on 
vessels which they had already built." This statement was entirely inaccurate, 
since the bids of the Herreshoff Company were rejected simply because they were 
received too late and could not properly be considered. As a matter of fact that com- 
pany bid 8166,000 for torpedo boats, which was less than the bid of the Columbian 
Iron Works and only $1,000 larger than the bid of Lewis Nixon. 

Admiral Bradford intimates that the loss to the contractors was due to delays result- 
ing from their subsequently taking on more favorable contracts, so that their yards 
were overcrowded. Of this it is sufficient to say that it was not true. The Navy 
Department had its inspectors at every yard, minutely supervising the progress of 
the work. These inspectors must have known whether the contractors were delaying 
because they were devoting their energies to other contracts, or because of their 
inability to obtain materials and to secure the approval of their detailed drawings. 

The Navy Department did not grant the contractors repeated extensions of time, 
waiving penalties for delay without careful investigation, and as just pointed out 
the department had its own men on the ground to aid in such an investigation. The 
action of the department is a sufficient answer to Admiral Bradford's suggestion. 

Naval Constructor Woodward's testimony. — The testimony of Naval Constructor 
Woodward before the House committee also deserves special attention. Captain 
Woodward had received a very thorough education in naval architecture both in this 
country and in France, and had had some experience in torpedo-boat construction, 
since he had had charge of the design of the hull for the torpedo boat Ericsson, one of 
the earlier boats built in this country. He had also been on the trial board and been 
present at practically all the trials of such of the boats now under consideration as were 
built on the Atlantic coast. He had not, however, been concerned in the preparation 
of the plans nor been familiar with the circumstances under which the contracts were 
placed and the conditions which affected the high cost of construction. On these 
questions he had made a hasty preparation by examining the records on file in the 
department. 

' Captain Woodward emphasized the fact that the speed originally required for these 
vessels was somewhat less than the maximum previously attempted, making a com- 
parison with the Porter and Dupont and Farragut and with the English vessels. But 
at the same time he criticised with considerable severity the structural strength of all 



80 TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 

these earlier vessels, and stated that the adoption of lower speed requirements "was 
not only justified but demanded" by the behavior of the previous high-speed boats. 
He also pointed out very emphatically the comparatively small value in connection 
with this work of experience with vessels of other types. 

His testimony contains an interesting comparison of the weights of the principal 
scantlings of the midship section of the Porter and Dupont with the same on the Stock- 
ton, one of the new boats designed by the department, showing only a very slight 
increase in weight in the designs for the Stockton. This comparison supports the state- 
ment made above, that although greater structural strength was demanded in the 
new boats, the other requirements involved such an increase of weight that practi- 
cally no margin was left for increasing the weight of the hull if the designed displace- 
ment was not to be exceeded. 

Data for estimates. — The portion of Captain Woodward's testimony which calls 
for most careful analysis is that relating to the data which the bidders had at their 
command for estimating the probable cost. He states that on October 1, 1898, the 
Farragut, then building by the Union Iron Works, was reported as 97 per cent com- 
pleted, and that on the same date the Dahlgren, building by the Bath Iron Works, 
was 90 per cent completed as to hull and 80 per cent as to machinery. From these 
facts he draws the conclusion that both these companies should have been in a "par- 
ticularly satisfactory situation to know what the cost of constructing such boats actu- 
ally was." October 1 seems to have been selected for the date for this comparison 
because it was about the time that the contracts were actually signed. Captain Wood- 
ward doubtless intended to be fair, 'but it is difficult to understand how he came to 
overlook the fact that the bids were opened in the preceding August, and that the 
contractors were therefore obliged to base their estimates upon data available at 
least two or three months before October 1. The conclusion of Secretary Long, that 
at the time the bids were made the builders had not progressed far enough with their 
earlier contracts to obtain much experience of the special character required, is much 
more accurate. 

Moreover, as we have seen, all the earlier boats differed so substantially in material, 
designs, and general requirements that comparisons based upon their cost were of little 
value. 

Captain W'oodward also referred to the bid of the Herreshoff Manufacturing' Com- 
pany and to the fact that that company had previously completed the Porter and 
Dupont. 

But when we examine his conclusion from all these observations we find that it 
in fact contains nothing at variance with the claims of the contractors. This con- 
clusion is as follows: 

"It would seem, therefore, that in the cases of these two bidders the amounts of 
their bids (Bath Iron Works, $161,000, Herreshoff company, $166,000) appear to fully 
justify the reasonableness of the department's estimate made at that time, namely, 
that with the prices of labor and material then current, torpedo boats fulfilling the re- 
quirements of the department's circular could, at the rate that had been charged in 
the past for similar work by responsible American builders, be built at a cost of not 
more than $170,000 each." 

The obvious comment upon this statement is that there were practically no current 
prices for the quality of material required, and that boats "fulfilling the requirements 
of the department's circular" and the further requirements which were added as the 
work progressed could not be built ' ' at the rate that had been charged in the past ' ' for 
the building of the American torpedo boats. That the department's estimates were 
justified, in the sense that the causes which rendered them inadequate could not pos- 
sibly have been foreseen in advance, is not only freely admitted, but affirmatively 
asserted by the contractors. 

Some inaccuracies. — Captain Woodward's statements as to the upset prices and as to 
.the contemplated displacement are somewhat inaccurate. He refers to the fact that 
one of the bids for these boats which was not accepted was considerably in excess of the 
upset price. This bid was made on the bidder's own plans, and it may have been hoped 
that those plans would appear to the department so excellent as to cause a departure 
from the requirements. The language of the department's circular was emphatic, 
however, and the upset prices were necessarily limited by the appropriation. The 
bid was not in fact accepted and there is no reason to suppose that any such bid would 
have had any chance of acceptance. In the matter of displacement, also, Captain 
Woodward argues from the case of the Farragut, in which a displacement many tons 
less than that contemplated by the contract had been accepted, that the bidders ought 
not to have regarded the provisions as to displacement in the case of the new boats as 
binding. Here again, however, the language of the circular was explicit, and declared 
that no bids for destroyers of more than 235 tons or for torpedo boats of more than 170 



TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 81 

tons would be considered. A large excess of displacement was afterwards permitted 
simply because the department frankly recognized its own responsibility for the 
excess. 

As to inspection. — In connection with the matter of government inspection, Cap- 
tain Woodward quotes the passage from the report of Linnard and Chandler, already 
eferred to. His idea seems to have been that since the builders were expected to work 
out the designs they should be held solely responsible for their excellence unless it 
appears that they were compelled by the inspectors to adopt designs which they did 
not approve. As we have already seen this was sometimes true, but the principal con- 
tention of the builders in this connection is not that the inspectors prevented them 
from securing the best designs, but that the many additional requirements imposed 
greatly increased the difficulty of their problem, and that the whole system of super- 
vision and inspection necessarily increased their expense. 

As to purchase of plans and information. — In connection with this question of designs 
and the responsibility of the builders for their excellence, Captain Woodward advances 
the somewhat surprising contention that the other builders ought to have followed 
the course adopted by the Bath Iron Works and purchased of foreign builders the 
information and experience which neither they nor the department possessed. That 
this course proved advantageous in the case of that company is, of course, true, but it 
also involved a very large expense, much larger than any profit which the Bath Iron 
Works hoped to make on these particular contracts. They might properly make such 
an investment if they chose to take the chance of ultimately making it good by a great 
many contracts of this character. It was hardly an investment which the Govern- 
ment had a right to demand, or which the Navy Department did in fact expect of the 
other builders. 

While not questioning the losses of the other builders, Captain Woodward professed 
to doubt whether the Bath Iron Works had in fact lost any money on these contracts, 
because they did not tell him so at the time when the boats were tried, and because 
they declined to submit a detailed statement of the cost to the Ramsay Board. This 
reticence on their part was adequately explained to the committees, as has already 
appeared. Meanwhile, there is no reason whatever to doubt the veracity of the testi- 
mony and the written statement presented by the vice-president of the company to 
the committees. 

Summary. — Taken as a whole, Captain Woodward's testimony is evidently a defense 
of the department, and his principal conclusion is, in substance, that the department's 
estimates were as accurate as could be expected. He evidently felt also that the 
department should not be. held responsible for the difficulties which the builders had 
encountered. On the first point no defense was necessary. As to the second, it is 
perhaps sufficient to say that his superiors were ready to acknowledge a much larger 
share of responsibility than Captain Woodward was disposed to admit. Had his exam- 
ination of the circumstances affecting the case been less hasty, and had it not been 
practically confined to the information which appeared in the department's records, 
it is not believed that he would have been disposed to dispute any of the contentions 
of the builders. 

Report of Linnard and Chandler. — The report of Messrs. Linnard and Chandler is very 
instructive in the light which it throws upon the difficulties of the problem under- 
taken. The entire report should be read, but one passage contains in concise form so 
many instructive comments as to justify its quotation in full at the expense of some 
repetition: 

"The torpedo boats previously built had been generally of much smaller size and 
much lower requirements as to speed, and it is believed that those who built them 
(except perhaps the Herreshoff Manufacturing Company) had had considerable diffi- 
culty in their completion. The building of successful torpedo vessels having the 
'highest practicable speed' is an occupation that requires designing talents of a hU>h 
order and prolonged experience in construction. There are comparatively few suc- 
cessful builders of torpedo vessels in the world; but the attempt was made in this 
country to rival the best results attained abroad with designs which were not based on 
the known results of a large number of previous vessels, and by builders whose knowl- 
edge and experience were of a limited character. 

"At the time these contracts were taken ^hce contractors evidently thought that 
the department's designs, or their own, would be entirely adequate to fulfill the pro- 
gramme laid down without difficulty, and they apparently went into the contracts with a 
light heart. As above stated, their experience, now that these vessels are approaching 
completion, shows that the difficulties of fulfilling: the requirements have been enor- 
mous and the cost to the contractors very largely in excess of the contract prices. As 
a number of these contractors have comparativelv small plants and capital, it is our 
opinion that if harshly dealt with they will undoubtedly be forced to the wall. * * * 

72536— t b D— 09 6 



j82 TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 

; "The situation is further complicated by the probability that a number of these 
vessels will fail to obtain their contract speed, or even that lower speed which, deduct- 
ing penalties, allows them to be accepted at all. Under these conditions the con- 
tractors universally seem very much depressed, and from their conversation it would 
appear that while no concerted action has been taken up to the present time, they 
will in all probability appeal to Congress for relief. 

"The grounds for this action, which have been outlined by them in conversation, 
are various, but the one which nearly all adopt as a basis for the claim is that they 
were led to believe that the plans and specifications furnished by the Government 
were adequate to achieve the results contracted for. That that is not the case is now 
evident, and is due to a variety of causes. All the vessels built on the department's 
design that have been tried are greatly overweight, and they all appear subject to 
excessive vibrations, causing breakdowns when the machinery is running at high 
epeed. The weights allowed in the designs required the most careful study of details, 
and the omission of everything nonessential to keep within the allowance, and it is 
doubtful, even with the most careful supervision, whether some excess would not 
have occurred, though doubtless many weights are in excess of those upon which it 
would have been feasible to design details of hull, fittings, and machinery. Moreover, 
the constant tendency to add additional things for convenience or comfort produces a 
jpeculiarly disastrous effect on these extremely light vessels, in which every particle 
of excess weight becomes a most serious handicap to the attainment of the required 



"The question of vibration on vessels which have very high-speed engines requires 

. the most careful consideration of structural arrangement to secure combined strength 

and lightness, and a prolonged study of the balancing of the engines. That these 

matters have not been sufficiently attended to is obvious from the results so far obtained. 

"The contractors feel, with some reason, that as they bid on department designs, or, 
in some cases, on bidders' designs closely akin to the department's designs, they are 
'jiot responsible for the failure to achieve results aimed at, and they all insist upon 
their good faith in endeavoring to carry out the department's wishes." 

Such testimony from an official source is obviously entitled to great weight. 

Report of the bureaus. — The joint report of the Bureau of Construction and Repair 
and the Bureau of Steam Engineering upon the letter from the committee of con- 
tractors presenting the first request for relief contains the following statements : 

"We do not hesitate to say that had the department and the contractors been pos- 
sessed in 1898 of the experience now gained in connection with these boats, their 
contracts could never have been made. In view of the above we are of the opinion 
that the department should take such steps as are within its power to facilitate the 
trials and delivery of these vessels, and that the circumstances of the case are such as 
to warrant the department in sharing with the contractors the financial losses which 
have been incurred. * * * We recognize the force of the contractor's statement, 
and consider that they have an equitable claim of a nature which has been recognized 
and accepted in many past cases by Congress. We believe, however, that it can not 
•be granted without congressional action." 

The majority report of the Board on Construction concurred with the joint report of 
the two bureaus. 

Bureau estimates furnished to Ramsay Board. — The estimates furnished by certain of 
the bureaus of the Navy Department to the Ramsay Board, covering the proper cost 
at that time of certain portions of the boats, furnish as clear proof as could be desired 
of the inadequacy of the contract prices. The Bureau of Steam Engineering was 
asked to estimate the cost of "the propelling engines, including piping, the boilers, 
including piping, the auxiliaries and engineering appurtenances, including piping, 
and the duplicate nieces of machinery required to be furnished by the contractor." 
The Bureau of Equipment was asked to estimate the cost of the electric plant and of 
the "outfit other than electric plant." 

The estimates furnished were, of course, only approximate, but they correspond 
very closely with the cost of the same items as reported by the builders in their sworn 
statements. 

Thus the bureau estimates of the cost of machinery and electric plant were slightly 
larger than the actual cost reported by a few of the contractors and somewhat smaller 
than that reported by others. In the case of the equipment other than electric plant, 
the bureau estimate was considerably smaller than the reported actual cost, but this 
difference is accounted for by the fact that the statements of the contractors included 
tinder this head a number of items which were not included in the bureau estimate. 

When attention is called to the extraordinary delays and other difficulties which 
tad affected the actual cost, a comparison of the builders' statements with the bureau 
estimates reflects the greatest credit upon the builders and furnishes the strongest 



TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 83 

evidence of the efficiency and the economy with which the contractors had handled 
their work. 

But the most interesting information furnished by the bureau estimates becomes 
apparent by comparison with the original contract prices. Thus the Bureau of Steam 
Engineering placed the approximate cost of the machinery for the destroyers at 
$207,700. The Bureau of Equipment estimated the cost of the electric plant at $7,877 
and the cost of the outfit other than the electric plant at $3,135. These figures covered 
only labor and material, making no allowance for general expense. Their total is 
$218,722, while the average contract price for the destroyers was only $281,750. This ! 
leaves a balance of only $63,000 for the construction of the entire hull, the installation 
of ordnance, the cost of speed trials, and the entire allowance for general expenses. 
For the torpedo boats the total of the corresponding estimates is $116,375. Subtracted 
from the average contract price, this leaves $36,545. The item of general expense, ' 
reckoned on the basis adopted by the Ramsay Board, and a very conservative estimate 
for trials would easily use up these balances, leaving nothing whatever for the hulls 

The testimony of the department officials, therefore, confirms beyond question the ! 
statement of the builders that the original contract prices and the maximum prices 
allowed by the Government were utterly inadequate to cover the necessary cost of the ' 
boats. 

Approval of present request by Navy Department. — The examination of the opinions : 
officially expressed and the evidence furnished by officers of the navy and of the 
department may be concluded with the statement that the contractors' request for 
relief was officially approved by Secretary Long, and had the continued approval of ; 
the Navy Department at the beginning of the present year. Secretary Long's letter 
transmitting the papers in the case to Congress, under date of April 25, 1902, after 
reviewing the case in a statement which, in every point touched upon, confirms the ; 
contentions of the builders as above set forth, concludes with the following paragraph: ' 

"With reference to your inquiry concerning the further relief of the contractors by ' 
Congress, it appears to be clearly established by the report of the Ramsay Board, : 
transmitted herewith, that the contractors have suffered heavy losses in the building; 
of these boats. It also appears from the accompanying reports of the bureaus con- 
cerned that these losses have been due to causes almost wholly beyond the control of ; 
these contractors under the circumstances set forth, thereby entitling them, in the ' 
opinion of the department, to equitable consideration." 

A letter from Acting Secretary Darling to the chairman of the Senate Committee on * 
Naval Affairs, dated January 25, 1904, after describing certain papers inclosed there- 
with, referred to the recommendation of Secretary Long in the following language: 

"The comments made in the aforesaid letter of transmittal and the opinion therein ' 
expressed as to the consideration the contractors should receive conform to the depart- '' 
ment's present views in the premises." 

There is no reason to believe that the department has since changed its attitude. 
I. Value of the Results to the Government. 

An element of the builders' case, of evident importance, is the fact that the Govern- 
ment has received the full value of what it is asked to pay. 

In spite of the great difficulties which they encountered in the construction of these : 
boats and in the fulfillment of the government requirements, and the heavy losses' 
which they suffered, the builders continued conscientiously and unremittingly their , 
efforts to conform in every respect to the most rigid interpretation of the terms of 
their contracts and of the requirements imposed by the department and its inspectors. 
When they made their first application for any relief, all of them had already expended 
considerably more than the entire contract price, and the modifications of the con- 
tract requirements which they then requested were so reasonable as to receive the 
prompt assent of the Navy Department. After these modifications were granted they , 
continued their work in the same conscientious spirit until, at the time of the com- 
mittee hearings, in February, 1904, all but three of the boats had successfully accom- 
plished their official trials and been delivered to the Government. Two of these three 
have since been completed and accepted. 

In the meanwhile three of the contractors had suffered so severely that their busi- , 
ness had gone into the hands of receivers. In two cases the work on the uncompleted 
boats was continued by the receiver, or by contract with the receiver, and they have 
since been completed and accepted. In the case of the torpedo boats Nicholson 
and O'Brien, the Government took possession of the boats, and one of them is not yet 
quite completed. In accordance with the terms of the contract, all the expenditures 
of the Government in the completion of these boats will be charged against the con- 



84. TORPEDO BOATS AND TORPEDO-BOAT DESTROYERS. 

tractor and deducted from that portion of the contract price which has not yet been 
paid. 

, In the case of these three contractors the money payable under the terms of this bill 
would go to their creditors, those who have furnished the materials and advanced the 
money for the prosecution of the work. These creditors, who are thus dependent 
upon the passage of this bill for at least partial reimbursement of their losses, do not 
include, however, the large steel companies referred to above from whom the plates 
and forgings were obtained. Those companies protected themselves by requiring 
payment in advance or upon delivery, a practice which, incidentally, added another 
straw to the financial burden of the contractors. 

Performance of the boats in actual service. — The performance of all the boats since 
their completion has demonstrated that the work of the builders was well done. Five 
of the destroyers have made the voyage to the Philippines, and arrived without 
mishap, an excellent performance for vessels of a type not primarily designed for 
long voyages or extended ocean service. At least two others have been through severe 
gales at sea without injury. Seven of the torpedo boats were in active service during 
the summer of 1902, covering a distance of approximately 8,980 knots in the course 
of this time and cruising as far as San Juan, P. R. This experience amply 
demonstrated the excellence of the boats. In fact, all of the vessels, both destroyers 
and torpedo boats, have proved efficient and satisfactory. 

Both Naval Constructor Woodward, in his testimony before the House committee, 
and Naval Constructor Linnard and Lieutenant Chandler, in their report aleady 
quoted, while strongly commending the excellence of several of the boats, expressed 
eome doubts as to whether a few of them would not prove unsatisfactory. In the 
former instance these doubts were expressed before the boats had been tested in 
service and in the latter before they had been completed. Captain Woodward criti- 
cised particularly two of the destroyers, fearing a lack of strength, while the report 
of Linnard and Chandler commends the same boats for their general lightness and care 
in design. It is sufficient to say that the fears of none of these officers were realized, 
and all the boats have proved themselves thoroughly serviceable. Lieutenant 
Chandler recently presented to the Society of Naval Architects and Marine Engineers 
a paper on "the performance of the torpedo vessels of the United States Navy at 
sea," based upon his own experience with the boats, and the contents of this paper, 
dealing with six of the torpedo boats and eight of the destroyers, amply justify the 
statements which have been made above. 

Summary. — The results which the Government desired to obtain in these vessels, 
that is to say, a combination of high speed with strong and durable construction, car- 
rying capacity, completeness of equipment, convenience and habitability, were suc- 
cessfully obtained. The boats not only mark a considerable advance over previous 
boats of the same type constructed in this country, but will compare very favorably 
indeed, in the all-round qualities which the Government desired, with the best of the 
boats which have been built abroad. 

Now that the steel makers of the country have learned, at the expense of these con- 
tractors, how to make plates and forgings of the highest class successfully, and the 
Navy Department and the contractors have worked out the difficult problem of design 
which these boats involve, they could probably be duplicated, not for their original 
contract price, but for a smaller sum than they have actually cost the builders. But 
the money that has gone into them represents not only the completed value of the 
boats, but the cost of learning all the lessons of construction which the department, 
as well as the builders, had still to learn when their construction was undertaken. 
Those lessons could not possibly have been learned nor these boats successfully built 
without costly experiments, and none of the money thus spent has been wasted. 

CONCLUSION. 

It is believed that the foregoing statement sufficiently discloses the propriety of the 
relief which the builders ask, and no extended argument will be attempted. It seems 
proper to point out, however, by way of conclusion, the very peculiar conditions govern- 
ing naval contracts, making those contracts essentially one sided, and leaving the con- 
tractors practically at the mercy of the Navy Department. 

In the first place the contractors have practically nothing to say as to the general 
terms of the contracts. Those terms are fixed partly by Congress and largely by the 
Navy Department before the advertisement for bids. The Government defines the 
general dimensions, the quality of materials, the limits of speed and displacement, 
the time permitted for completion and the maximum price allowed. The bidders 
can not modify these requirements by negotiation if any of them appear to them 
unreasonable; they must accept them as they are, or not bid at all. 



TORPEDO BOATS AND TOBPEDO-BOAT DESTEOYEES. 85 

The requirements having been thus fixed, the contracts are placed by a system of 
competitive bids, involving an inevitable tendency to ruinous competition. Such 
competition practically discourages all prudent provision in the bids for unforeseen 
conditions. The bidder must take all chances if he is to compete for this work at all. 

Again, only the most general requirements of the contract are specified in advance. 
As to the requirements in detail, the contractor not only has no voice in their final 
determination, but he has no notice, when the contract is undertaken, what they are 
to be. He must agree to conform to whatever the department may subsequently 
direct, at the same time bearing all responsibility for the results. Any estimate of 
cost upon which his bid may have been based is reliable only so far as he may have 
been able to forecast the future requirements of the department officials. Moreover, 
he is subject to indefinite delays while the department is examining the drawings he 
has submitted or considering alterations in the original plans. In short, if he makes 
a profit on his contract it is more by the mercy of the department than by any protec- 
tion which the contract affords him. 

Finally, if his work does not come up to the requirements, whether or not the fault 
was his, all his rights under the contract are forfeited and the vessel is taken over by 
the Government on its own terms. 

That contracts performed under such conditions can not be judged by the same 
rules as ordinary business contracts must be obvious. 

Such a situation as has arisen in the present case would be impossible under the practice 
which prevails in England. Naval contracts there are not placed by competitive 
bids. The Government invites tenders from contractors who desire to perform the 
work. The contracts are then awarded at the discretion of the admiralty, with an 
eye to the previous experience of the contractors, the excellence of any previous 
work which they may have done, the adequacy of their equipment, and similar condi- 
tions. The prices are fixed by negotiation. The general requirements of the con- 
tracts are determined, and no others are imposed after the contracts are signed. The 
inspection is only such as is necessary to see that these general requirements are being 
observed. Two officers are detailed to inspect all the construction of a certain class 
which is going on at one time, and these officers visit the various yards at such inter- 
vals as are convenient. Finally, if the cost in any case exceeds the contract price 
without fault of the contractor, the loss is made good. Such matters are promptly 
arranged by a parliamentary committee, charged with the duty of adjusting them. 
For the general excellence of the results the Government relies, not upon a constant 
and rigid supervision and dictation, but on the knowledge of the contractor that any 
expenditure he may make above the contract price will be made good, and that his 
success in obtaining future contracts will depend upon the excellence of his work. 

The present request for relief is not based, however, upon any claim that our Govern- 
ment ought to adopt the English policy, nor is it intended to criticise the wisdom of 
the methods adopted in this country. The hardship which those methods impose 
upon the builders has been emphasized only because it may fairly affect the spirit 
in which the present question should be approached. The one-sided character of 
our naval contracts is not itself the ground upon which this relief is asked, but it 
made possible the entirely unusual combination of circumstances which caused the 
losses of the builders and which, in their opinion, entitle them to relief. 

These unusual circumstances are, briefly, the absolutely new and special character 
of the problem which the work involved, the known inexperience of the builders 
with work of that character, their natural and proper reliance on the judgment of the 
department, the entire inadequacy of the maximum prices which the department 
allowed to cover the necessary cost of the boats, the miscalculations involved in the 
government requirements as to speed and displacement, the unprecedented extent 
to which the power of inspection and supervision was exercised, and the continual 
imposition of further requirements immensely increasing the difficulties and expense 
of a work which even without these additional requirements demanded the greatest 
skill for its successful completion and could not possibly have been completed without 
serious financial loss. 

That such a case is peculiar goes without saying, and it would seem that a stronger 
case for relief could hardly be presented, nor one involving less danger that the prece- 
dent could ever be misused. That a similar combination of circumstances would 
ever be permitted to arise is not likely; but if the case should be repeated in all its 
hardship it is certainly to be hoped that the Government would then be equally just. 

The Government and the builders undertook together a task whose difficulties 
neither of them could foresee, but the conditions of the joint enterprise were such 
that the builders must bear all the burden of unforeseen difficulties and all the risk 
of failure and loss. The difficulties were overcome, and successful results were 
achieved. The Government enjoys the fruits of its success; the builders have borne 



86 TOBPEDO BOATS AND TOBPEDO-BOAT DESTBOYEBS. 

the cost. The Navy Department promptly recognized the equities of the situation, 
and recommended to Congress the relief for which the builders ask. It now rests with 
Congress to deal with that recommendation as it shall deem just. 

Andrew G. Wilson, 
General Manager, Maryland Steel Company, 
Lilburn T. Myers, 
Receiver, William R. Trigg Company, 
Francis T. Bowles, 
President Fore River Ship and Engine Company, 
December, 1904. Committee 



LEMy'09 



